Home buyers in the South County may be more willing to open
their checkbooks, now that the housing market appears to be slowly
pulling out of a slump, according to local Realtors, and a new bill
recently signed by the president could be one of the motivating
factors.
The bill – H.R. 5140 – increases the conforming loan rate from
$417,000 to $700,000, therefore raising the threshold for jumbo
loans.
The president signed H.R. 5140, which is an entire economic
stimulus package including tax rebates, last week. The bill
provides for several changes to mortgage rates.
Home buyers in the South County may be more willing to open their checkbooks, now that the housing market appears to be slowly pulling out of a slump, according to local Realtors, and a new bill recently signed by the president could be one of the motivating factors.
The bill – H.R. 5140 – increases the conforming loan rate from $417,000 to $700,000, therefore raising the threshold for jumbo loans.
The president signed H.R. 5140, which is an entire economic stimulus package including tax rebates, last week. The bill provides for several changes to mortgage rates.
“Right now, I’m working with a veteran, their loan max was also increased, but typically I don’t work with VA loans,” said Hollister Realtor Mary Anne Filice. “What I’ve discovered in the process is that most of the people I’m talking to are pretty limited in how much they can pay for a monthly mortgage payment. Increasing the amount doesn’t really change that. What it really does, in essence, is it helps with the rates. Typically, a jumbo loan has a higher rate than a conforming loan, and now that housing prices are going down, with the limit raised, they can get a conforming loan with a lower rate.”
John Wunderlich, loan officer and Realtor with Continental Mortgage and Help-U-Sell in Morgan Hill, said the higher amount will expand options for homebuyers.
“In order to let the government guarantee these loans, in these areas where housing costs are higher, they had to raise the conforming limit,” he said. “The money was drying up to lend out.”
The economic stimulus package includes a provision that will temporarily raise the conforming loan limit to allow purchase or guarantee many jumbo mortgages originated between July 1 of last year and the end of this year.
The increase, to as much as $729,750 in high-cost areas, will also apply to Federal Housing Administration loan guarantee programs. Because the increase will be capped at 125 percent of the median home price for an area, the conforming loan limit will remain at $417,000 in markets where the median home price is $333,600 or less.
Santa Clara County median homes prices fell to $658,000 in February 2008, down 38 percent from the same period last year. In Gilroy, median homes prices were $598,750, in Morgan Hill $799,000 and in Hollister $414,000.
Michelle Beltran with Beltran Properties in Gilroy, who handles properties all over the state, said she believes the market is turning around.
“We’ve hit bottom, no doubt about that, and we’re coming back up,” she said. “Commercial has been busy, but now I’m starting to see the investors and buyers coming out of the woodwork.”
Some mortgage brokers have noticed an increase in interest in refinancing, they say, but the so-called stimulus package hasn’t had a dramatic impact yet.
“We have seen a spike in interest, numerous phone calls, but what I see is that consumers are still a little on the fence about the entire industry itself,” said Scott Smith, a mortgage broker with Realty World in Gilroy. “Perhaps that will change, and I think as consumer confidence increases, we can look forward to a positive future in real estate. I don’t think it’s too far off. I think the low home prices right now are starting to stir an interest, but I think that’s separate from the conforming loan amount.”
Because the interest rate for the new loan amounts is not that different from the higher “jumbo loans,” some brokers say, raising the conforming loan rates has not generated an increase in people seeking refinancing.
“The rates are really similar to jumbo loans,” said Vicki Mohnach, a broker associate. “There are also certain restrictions on the new loan amounts that keep people from qualifying … I don’t think this (raising the conforming loan amount) is going to be the stimulus it was supposed to be. It didn’t fix everything.”
Right now there are a lot of outside factors affecting the market, brokers say, including the recent sub-prime debacle, and the fact that many consider the economy to be in a recession.
“With the low home prices, we’re starting to see people who are interested in an investment, maybe a short-term opportunity to make some money, come out and show interest,” Smith said. “We also have elections coming up, which tends to spike the economy. I think we’re going to see things begin to improve.”
Filice said with housing prices on the way down, there will be an increase in market turnover.
“I don’t believe the inventory is yet at its peak, but we see it grow,” she said. “I’m not sure I see the housing market rebounding, but I do see it leveling. This was bound to happen, the prices were outrageous,” she said. “I think people just didn’t realize it was going to hit like an anvil.”
