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Regular Contributor
Scandelous
Posts: 68
Registered: ‎06-07-2013
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2014 Conforming Loan Limits - Shift in Market Coming?

On January 1, 2014, FHA will place conforming loan limits on new mortgages and refinances.
http://www.smartasset.com/blog/housing/lower-loan-limits-what-it-means-for-you/

 

With how expensive housing is in the Bay Area, does anyone see this as causing a shift in the market when less buyers are qualfied to purchase a home?

Regular Contributor
bahomeloaner
Posts: 73
Registered: ‎05-15-2012
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Re: 2014 Conforming Loan Limits - Shift in Market Coming?

Jobs and incomes are more important than interest rates. Just ignore this **bleep**.

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basschick
Posts: 492
Registered: ‎07-17-2012
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Re: 2014 Conforming Loan Limits - Shift in Market Coming?

this had nothing to do with interest rates.

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sfsfr
Posts: 657
Registered: ‎04-15-2012
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Re: 2014 Conforming Loan Limits - Shift in Market Coming?

I don't think this will have much of an impact. The market up until now has been largely supported by buyers who are putting enough money down for a conventional, non-FHA loan (or no loan). Even lowering the conforming, non-jumbo loan limits won't have a big impact. This will just push more buyers into jumbo territory, and jumbo rates are actually lower than conforming rates right now.

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DealHunter0
Posts: 388
Registered: ‎04-05-2011
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Re: 2014 Conforming Loan Limits - Shift in Market Coming?


sfsfr wrote:

I don't think this will have much of an impact. The market up until now has been largely supported by buyers who are putting enough money down for a conventional, non-FHA loan (or no loan). Even lowering the conforming, non-jumbo loan limits won't have a big impact. This will just push more buyers into jumbo territory, and jumbo rates are actually lower than conforming rates right now.


I would agree that it won't have much of an immediate impact on high end values where most are already using private jumbos (in some cases with rates lower than conforming mortgages).  I think we could see an impact on the low to medium range (300–600k), where buyers are not necessarily affluent and may not have 750+ credit scores.

 

One situation where I foresee this really taking a toll would be in another housing downtrend.  In 2009-2010, private mortgages just about disappeared from the market place...Freddie, Fannie and FHA were the only game in town.  If we eventually have another crash (not implying in the immediate future) prices could go much lower with a more limited government backstop.

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Michelle1x
Posts: 729
Registered: ‎02-17-2008
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Re: 2014 Conforming Loan Limits - Shift in Market Coming?

The amazing shift lately is that private jumbos have lower interest rates than some of the conforming.  It is still hard to get a loan, but rates are great.

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sfsfr
Posts: 657
Registered: ‎04-15-2012
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Re: 2014 Conforming Loan Limits - Shift in Market Coming?


DealHunter0 wrote:

I would agree that it won't have much of an immediate impact on high end values where most are already using private jumbos (in some cases with rates lower than conforming mortgages).  I think we could see an impact on the low to medium range (300–600k), where buyers are not necessarily affluent and may not have 750+ credit scores.

 

One situation where I foresee this really taking a toll would be in another housing downtrend.  In 2009-2010, private mortgages just about disappeared from the market place...Freddie, Fannie and FHA were the only game in town.  If we eventually have another crash (not implying in the immediate future) prices could go much lower with a more limited government backstop.


I don't agree that in another downturn things will be terrible. Last time around, the housing market and banks were hammered by all of the foreclosures and short sales. These days, there are more buyers with skin in the game, i.e. large down payments. This will discourage "strategic default" because it will rarely be strategic to lose your large down payment through foreclosure or short sale.

 

Without a glut of distressed properties, banks shouldn't get hammered and require as much government backing, which is the way it should be. Also, supply will dry up in a downturn as homeowners wait it out rather than foreclosing or selling for a big loss. This should keep prices from plummeting.

 

If we start seeing increased frequency of low or no money down loans again, then I'll be nervous...

Silver Contributor
DealHunter0
Posts: 388
Registered: ‎04-05-2011
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Re: 2014 Conforming Loan Limits - Shift in Market Coming?


sfsfr wrote:

DealHunter0 wrote:

I would agree that it won't have much of an immediate impact on high end values where most are already using private jumbos (in some cases with rates lower than conforming mortgages).  I think we could see an impact on the low to medium range (300–600k), where buyers are not necessarily affluent and may not have 750+ credit scores.

 

One situation where I foresee this really taking a toll would be in another housing downtrend.  In 2009-2010, private mortgages just about disappeared from the market place...Freddie, Fannie and FHA were the only game in town.  If we eventually have another crash (not implying in the immediate future) prices could go much lower with a more limited government backstop.


I don't agree that in another downturn things will be terrible. Last time around, the housing market and banks were hammered by all of the foreclosures and short sales. These days, there are more buyers with skin in the game, i.e. large down payments. This will discourage "strategic default" because it will rarely be strategic to lose your large down payment through foreclosure or short sale.

 

Without a glut of distressed properties, banks shouldn't get hammered and require as much government backing, which is the way it should be. Also, supply will dry up in a downturn as homeowners wait it out rather than foreclosing or selling for a big loss. This should keep prices from plummeting.

 

If we start seeing increased frequency of low or no money down loans again, then I'll be nervous...


25% of buyers are still FHA (nationally), putting an average of ~4% down....

 

You won't see them in the prime BA markets because the payments are too high and they can't compete with the all cash/high downpayment crowd...but in the East Bay, San Jose, Oakland, RWC, they're out there putting minimal money down.  To make things worse, because they can't beat out the all-cash investors for the good deals, they're (over)paying for flipped houses in rough neighborhoods because it's the only way for them to close a deal.

 

There are still weak hands in this market...