And the Powerball jackpot number is 697,500.
The big news today is that both the FHA and conforming loan limits for San Diego County are now $697,500, this according to the Department of Housing and Urban Development. That’s the easy part to digest. What precisely this will mean to borrowers, and when, is a little more unclear.
I took the opportunity to chat briefly this afternoon with Tim Fiero, Senior Loan Consultant for Home Services Lending. Lenders and mortgage brokers are busy, busy folks this week, so a big Gracias to Tim for agreeing to give me a little of his time and a lot of insight.
ABOUT THE AUTHOR Kris Berg is Co-Owner and Designated Broker of San Diego Castles Realty. If not-so static web sites are your thing, go here at once where you will find loads of real estate information including homes for sale, market trends, floor plans and more. Kris's hobbies include fencing and spot welding. She likes kittens. 
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{ 9 comments… read them below or add one }
Wow, nice!!! Very interesting!
What I’m taking away is that loan limit changes don’t do all that much. Possibly a small reduction for rates on 417k-697k loans. But that goes away at the end of the year. No change for loans under 417k or over 697k.
On the walking away, I don’t blame the people for foreclosing. (exercising their put option). I blame the banks for lending way too loosely. They are reaping what they sowed.
Jakob – True, however, since conforming loan lenders will not be able to get their act together for another couple of months (software conversions, etc.) the lobbying effort is already underway to extend the loan limits for at least another year, if not longer.
Stumbled across your blog. Always amazed how different the various markets are. The ceiling was raised to 287k here. New Orleans had no real estate bubble but have to face the new hardships because of the bubble markets. This of course a much poorer market that that of California.
Steve, interesting.
BTW, looks like the reduction can’t come soon enough. Average jumbo rates are surging. Now up to 7.09% from 6.82% last week.
http://tinyurl.com/275cgd
Conforming is rising too. 6.12 up from 5.88 last week.
Jakob – Expect volatility with interest rates for a while (both directions). Still, they are not at a bad level, especially in the context of the direction of home values.
It’ll help, but it’s really not going to increase sales volume. Fannie Mae and Freddie Mac usually require guarantees from the lender’s that if the loans default, the lenders will buy them back. The lenders know this, and they have all increased their lending standards significantly so that *gasp* you actually have to be able to afford the home you are buying. (crazy talk) Doing stated income loans without large amounts of verifiable assets is…. extremely hard to do now.
Essentially, to buy a 450k house (which is close to the median for San Diego), you need an annual salary of over $95,000. The median household income in San Diego is $47,067 and the median family income is $53,438.
By increasing the conforming loan limit, all they really do is allow the big lenders to immediately raise some much needed capital to keep themselves in business by selling a lot of the previously jumbo loans that they had. This is good because we really don’t need more lenders going out of business. It doesn’t fix the problem that the percentage of people in San Diego who can afford San Diego real estate is a very small number that all these 10’s of thousands of homes are being marketed to.
Bottom line, the number of people capable of buying will barely change. We need prices to go down more. Supply and Demand.
Sven – Your last comment is right on, IMO.
Jakob – I declare one blog-free Saturday and return to find you have blown up my side bar.
I replaced your very long link with a tiny url.
And, yep, we are seeing volatility and a lot of uncertainty right now. We don’t really have a sense of where the “new and improved” conforming loan (or FHA loan) rates are going to land, or even if it is going to be a tiered structure. We have a few clients standing by until it gets sorted out, and for those who can qualify, the higher limits will likely be a good thing. However, it is not going to be a panacea by any stretch.
“This is good because we really don’t need more lenders going out of business.”
How do you figure, sportsfan? This whole problem was caused by the loan originators who were able to package their loans and sell them into the market. The only companies this helps are the mega-banks (UBS, Citi, BofA, Countrywide, etc.) that are holding these underwater loans (either on their books or in SIVs that they are taking onto their books). Now they can pawn their junk off on the taxpayer. What happened to the GOP being the party of fiscal responsibility?
This change will help people in the 417-697k range and the banks. I don’t think you are going to see the fly-by-night mortgage originators coming back to life anytime soon. This change will not help keep cushy San Diego real estate jobs. Those days are over. Time to start looking for real work, people. 2008 in San Diego is like 2001 in San Francisco, when all the dot-com kids had to grow up and actually work for a living.
Learn the lesson of Japan in the ’80s. This is going to be ugly.
House Hunter – Agreed re: the fly-by-night mortgage companies of the past.
But looking forward, the big difference will be in the underwriting (or lack thereof), which was a major contributor to the problems we are now facing. In case you have not checked lately, between old/bad loan workouts, refinancing and new originations, the lenders who remain solvent are inundated. Already, the demand for the new FHA loans is fueling a resurgence of lenders trying to get their FHA certification. Buyers today are fortunate if they can close escrow in 30 days due to this workload. Yes, the taxpayer may be taking on the load, but the underwriting requirements actually mandate documentation this time around.
And for the record, we have never perceived our job to be “cushy.” With our average transaction in the $700,000 range, we sweat each and every one to ensure success to greatest possible degree.
We are not yet done with the recalibration of the market, but we are approaching the corner faster than most people think.