Let's look at the local take on current news about mortgage financing. . .

News from the Mortgage Bankers Association:

"The White House surprised many on Monday by suddenly withdrawing its support for the inclusion of FHA reforms in President Bush's proposed economic stimulus package. Bush had previously made several personal pleas to Capitol Hill legislators on the importance of passing the bill, which would allow the FHA to insure more loans. Attaching the provisions to his economic stimulus plan had been viewed as a mostly innocuous move on the way to quick enactment. Among the provisions in jeopardy is one that would relax down-payment requirements and one that would temporarily raise the conforming-loan limit, thus give Fannie Mae and Freddie Mac a chunk of the jumbo loan market. A Treasury spokesperson said the department prefers that Congress address FHA reform as a separate issue from the economic stimulus package."

Increasing the conforming limit from $417,000 would help re-ignite the second home market at the beach.  It costs a Jumbo borrower about 1% more in interest rate to borrower $500,000 compared to $400,000 to purchase a $650,000 property. 

Increasing FHA limits are critical here is Sussex County.  Our current limit is $247,000 and it hasn't changed since January 2005.  Because FHA requires only a small down payment and has no minimum credit score, it's a much better alternative to the "sub-prime" loans that have been offered in the past to borrowers with little cash and less than perfect credit.  We need higher limits in Sussex now.

"Economists are optimistic that language included in the stimulus package to raise the limit on jumbo loans will lead to a major refinancing boom this year. The $150 billion package of tax cuts and rebates includes a provision to increase the conforming loan limit from the current threshold of $417,000 to as high as $729,000 in costly housing areas such as New York and California, which would make jumbo loans cheaper for buyers and more marketable for investors. Richard Berner, chief economist at Morgan Stanley, says jumbo loans account for about one-fifth of all outstanding mortgages; and he expects consumers to save more than the record $31 billion windfall recorded during the 2003 refinancing wave. "It could do a lot to unfreeze the mortgage market," agrees John Rutledge, an economic consultant and former Reagan economic adviser."

If the conforming limits do get raised, borrower's will need to act quickly because the increase will only be for the remainder of 2008.

"The Commerce Department's recent new-home sales report reveals substantial weakness in the housing market; and more declines are on the horizon, according to some economists. The report shows a 26-percent plunge in sales volume last year compared to 2006 and just a 0.2-percent increase in the median price to $246,900 over the same period. New-home sales fell 4.7 percent to an annual pace of 604,000 in December, and the median price of $219,200 marked a decline of 10.9 percent from the same month of the prior year."

These numbers are for NEW home sales and indicate builders are still having trouble moving their inventory. The story locally is not as bleak.  In all of Sussex County, single family home sales in 2007 totaled 2,153 units and the median price was $283,333.  Although the number of units sold dropped from 2006 by 17%, the median price was flat, increasing 0.1% from $283,013 in 2006.