patrick.net

"propping up" high-end in a given market supports all housing in that market.

If the high end falls from $700,000+ to $600,000+, what was $600,000 will also fall, and this chain reaction of adjustment will continue right down to the cheapest POS on the market.

“propping up” high-end in a given market supports all housing in that market."

Would you say that for all housing markets though? SF I can see that being true but I'm not sure if that really applies to NYC or D.C.

Dunno, why wouldn't it?

The housing market is complicated, with buyers and sellers and sellers becoming buyers but the high end coming down in price has to affect everything eventually since price is how we sort the market.

Can't speak to others here but in the Bay Area there are large areas on the Peninsula, let alone in the city, where prices are still at 6x incomes or more and you frequently see 600-700k+ asking prices even for crappy condos, let alone SFH. Here's hoping they let it (the jumbo limit) go back to 400k and let the market stand on its own without artificial price supports to benefit the banks, realtors, and speculators at the expense of the rest of us.

JimAtLaw says

Here’s hoping they let it (the jumbo limit) go back to 400k and let the market stand on its own without artificial price supports to benefit the banks, realtors, and speculators at the expense of the rest of us.

well then ,...I guess they will raise the lone limit. can't have those folks losing money now can we?

Troy says

“propping up” high-end in a given market supports all housing in that market.
If the high end falls from $700,000+ to $600,000+, what was $600,000 will also fall, and this chain reaction of adjustment will continue right down to the cheapest POS on the market.

Today I would not consider $700-600K to be the top end. These were once your typical ordinary homes once priced 200-250K not that long ago. So they fall back to reasonable prices. Good for all...

robertoaribas says

After all, there must have been some reason people preferentially paid more for the first home all along.

We will find that the original reasons were not well supported for the long term. Its really crazy to see 100K home inflate to over 500K, therefore we may well see prices drop to 100K range+inflation/income gains.

So what?

Checkout bankrate.com, a Jumbo loan (30yr fixed) has an interest rate of approx. 5.021%. Conversely, a non-jumbo is about 4.5%

Most people will want to finance at the best rate but for the really big mortgages out there most people are not going to care about the half percent point.

I think this is a good thing because it encourages more responsible loan products but it's not going to change much.

In general prices are effected by demand, the economy, location, interest rates, etc. etc.

Jumbo and non-jumbo limits are negligible.

kronicade says

Checkout bankrate.com, a Jumbo loan (30yr fixed) has an interest rate of approx. 5.021%. Conversely, a non-jumbo is about 4.5%

FHA limit in LA covers up to $755,000 purchase price with 3.5% down.

This will fall to $647,000 later this year.

Current interest rates on a 3.5% down $728,000 loan is 4.25%.

AFAIK loans above the conforming limit require 20% down and come with a 5% interest rate.

The changes are far from negligible.

That's just not true. You can purchase using a conventional WITHOUT 20% down for jumbo or non-jumbo.

The interest rate will be higher than an FHA but we're already as low as interest rates can get.

Yes, this is negligible for an average buyer, even for California. If you're buying a 700k home you SHOULD have something to put down (more than 3.5%).

Ugh

kronicade says

The interest rate will be higher than an FHA but we're already as low as interest rates can get.

your own numbers show non-corforming has a 10% higher cost of money. That's a $25,000 hit at the $700,000 price point.

f you're buying a 700k home you SHOULD have something to put down (more than 3.5%)

tell it to the buyers, LOL. As for loan availability, I'm just going by google mortgage thing. They don't have any non-conforming loans without 20% down.

I know Union Bank also doesn't do their own loans without 20% down. Maybe others do. Dunno.

Troy says

This will fall to $647,000 later this year.

Yeah, and it can't fall fast enough. The conforming limit should be $417K again or lower. It's good to see that this is closer to reality in Monterey County now: "The biggest decline is set for Monterey County, California, where the cap will drop by $246,750 to $483,000."

This guy's quote is hilarious:

“I look at it like a deadline because right now I can get more house for my money,” said Jon Clyman, a 37-year-old real estate broker whose wife is a controller at a bank. “I’m seizing the opportunity while it exists.”

I'd love for this guy to explain how it's more house for his money.