Changes in conforming loan limits and tomorrows buying power.
I was just updated by a senior mortgage consultant (Brian Moggan with MSP home loans) who works with many home buyers in the Oakland Piedmont and Berkeley area and he said that the FED is not likely to extend the temporary increase in the conforming loan limit. (currently at $729,000)
So why does that matter to you? Well, with the conforming loan limit up at $729k the average buyer with 20% down payment (plus a $729k loan) can afford a $910,000 property purchase. When the conforming loan limit decreases back to $625k, the average buyer with 20% down payment (plus a $655k loan) can only afford a $780,000 property purchase.
Now some buyers will still be able to purchase more expensive properties because they qualify for a JUMBO loan. However, JUMBO loans have higher interest rates, require a larger down payments and require more post closing cash reserves by the borrower.
In short, when Conforming Loan Limits are returned to $625k or lower, homes listed above $780,000 are going to have fewer buyers with the purchasing power needed to buy them. Many homes in the Oakland Hills area fall directly in to this price zone.
Buyers generally “purchase homes by payment.” When purchasing power decreases for any reason, it puts downward pressure on sale prices.
I’m here for any assistance you need. Please feel free to contact me for more information about the market or your homes value in today’s real estate environment.
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