patrick.net

Some buyers will be pulled in, others won't. It may make for an interesting fall though.

How is it that we are living in an economic period where it seems nearly every single thing is increasing in price except housing?
Housing compared to everything else is tanking as far as i can tell. These are truly Crazy times.

My take is that the government should not guarantee any loan that is more than 4 times the Average 3 yr Annual Household Income of the buyer, without any 'Limit' irrespective of where they live!!

Katy Perry says

How is it that we are living in an economic period where it seems nearly every single thing is increasing in price except housing?

Housing compared to everything else is tanking as far as i can tell. These are truly Crazy times.

Let's see, people are starting to complain about $4+ gallon gas then why one should not complain about an overpriced wooden box?

i'm just going to wait until after october to see if sales in the higher price ranges are affected and by how much.

every year there's some major event to wait out.
2008 recession.
2009 tax credits. QE1 - $1T MBS purchases.
2010 tax credits extended. fraudclosure.
2011 - lowering of mortgage limits and QE2.

here's one more thing to look for to know things aren't completely fucked over in real estate land.
the real estate market is uneventful.
no more tax credits, no quantitative easing, no talk about getting rid of fannie mae, freddie mac or the mortgage interest rate deduction.

ideally real estate, dropping house prices, and foreclosures are not even mentioned in the news because things have leveled off.

just sellers selling , buyers buying.
because there's no government-sponsored lube needed to grease the spunk covered real estate wheels.

E-man says

Probably put a little pressure on home prices above $650k, but wouldn’t impact homes below this price.

Probably more than just a little. I think the argument could be made that the upper end of the mortgage-financed market is going to take a ~$100K dump, which will ripple down through the lower tier markets. That said, the strongest impact on prices will probably be on the upper end, as rent levels *should* keep a solid floor on lower end prices... unless rents drop as well...

Syphilis says

i’m just going to wait until after october to see if sales in the higher price ranges are affected and by how much.

Agreed.

Syphilis says

just sellers selling , buyers buying.
because there’s no government-sponsored lube needed to grease the spunk covered real estate wheels.

Zing!

for the bay area upper end houses are already over the limit and the market is pretty strong

what it really means is that you'll be paying a higher rate if your mortgage is in the 625-729k price range
I think that's it. I predict minimal impact on prices.

toothfairy says

for the bay area upper end houses are already over the limit and the market is pretty strong

I should clarify. What I meant was the upper-end of the mortgage-financed market currently accessible by a conforming loan (~729K) will take a hit because the new upper end of that market will be 625K.

toothfairy says

for the bay area upper end houses are already over the limit and the market is pretty strong
what it really means is that you’ll be paying a higher rate if your mortgage is in the 625-729k price range

Which broadly means higher monthly payments for that price range, versus now. This, as well as likely higher downpayment requirements will price some currently eligible buyers out of that market (625-729k price range). Particularly those buyers who have no choice but FHA.

toothfairy says

I think that’s it. I predict minimal impact on prices.

We'll see. I think the impact will be stronger.

From the OP's article:

Investors like the fact that jumbo loans tend to be safer and more profitable than smaller ones. The privately-backed mortgages require bigger downpayments (currently about 30 percent of the home's value, instead of the 20 percent more typical in less expensive loans), which adds security.

"I see borrowers, if they want that kind of loan, paying a little more," says Chrisman. "But it's not going to be a life changing event for a couple of orthopedic surgeons in Beverly Hills."

bubblesitter says

Let’s see people are starting to complain about $4+ gallon gas then why one should not complain about an overpriced wooden box?

I'm taking that one to Easter Brunch! Those family members so heavily invested in the notion of ever increasing real estate prices will have one more reason to look askance at me!

BD

SF ace says

If i was the borrower, I’ll pay 20% down and bridge the rest with a floating HELOC at 4.25%. (and leave the option pay it off it rates ate too high, say 6%)

You seem to be some kinda rich dude to be having that kinda money ( $ 180K - 280K). Wondering how many people on this forum have that kinda money!!

Teddybearneil says

You seem to be some kinda rich dude to be having that kinda money ( $ 180K - 280K). Wondering how many people on this forum have that kinda money!!

That is very little money depending on your age, so it's all relative. If you're 20 years old that's a lot of money, if you're 30 that is not much money. If you're 40 you better start doing something different and if you're 50 you're screwed.

rob918 says

Teddybearneil says

You seem to be some kinda rich dude to be having that kinda money ( $ 180K - 280K). Wondering how many people on this forum have that kinda money!!

That is very little money depending on your age, so it’s all relative. If you’re 20 years old that’s a lot of money, if you’re 30 that is not much money. If you’re 40 you better start doing something different and if you’re 50 you’re screwed.

rough rule of thumb: expected net worth = age * salary / 10
two be considered high net worth. double it.

Other rules of thumb:

http://www.milliondollarjourney.com/30-personal-finance-rules-of-thumb.htm
(items 21 to 30 are all car related)
- Every $1 in your RRSP in your 20s corresponds to a dollar of yearly income after 65
- Every $2 in your RRSP in your 30s corresponds to a dollar of yearly income after 65
- Every $4 in your RRSP in your 40s corresponds to a dollar of yearly income after 65
- Every $8 in your RRSP in your 60s corresponds to a dollar of yearly income after 65
- at 65 should have around $25 in your RRSP for every dollar of income (equates to 4% withdrawal rate).
* RRSP(registered retirement savings plan) is the canadian equivalent of a 401k

This one is pretty good:
http://money.cnn.com/2003/07/21/pf/saving/rules_thumb/
how much house? 2.5 times gross income
how much retirement? 20 times retirement expense. if you need $50k/year in retirement, nest egg should be $1M(assumes 5% withdrawal rate)
how much life insurance? 2 times gross salary

E-man says

Is that for each individual or a married couple should have twice that networth rule of thumb?

Say a 25 year old single kid making $80k/year should have a networth of $200k?

i would apply it for each person.

it's a rule of thumb which doesn't work well for people (recent graduates) just starting out because they usually have heavy school debt and haven't started to accumulate any net worth.

As long as people HAVE to put down at least 1/4-1/3rd of the price of a house to qualify for a mortgage the housing market can be remotely functioning. So in typical fashion this isn't enough and nor will it ever be.

Until there is a federal law that makes loans spanning over 10 years illegal; our society is going to bubble and bust violently and some areas will remain indefinitely overpriced, stifling economies with the burden of housing. People like to think it keeps the trash out; no its doesn't. The fact that there will always be a cheaper side of the tracks will keep the so called riff-raff out; whether the median price in the upscale part of town is 90k or 900k demographics will stay as it is.

The deluded filth we have to wash from our global culture is that taking our 20-30 year loans is okay. It is not and anyone who actually thinks will concur; ALLOT can happen in three years, let alone 10 or 30!

SF ace says

If i was the borrower, I’ll pay 20% down and bridge the rest with a floating HELOC at 4.25%. (and leave the option pay it off it rates ate too high, say 6%)

Bridge with a HELOC. Genius. Welcome to 2006.