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Urgent: No More High Balance Conforming Loans for Manhattan

By Mitchell J Hall

Real Estate Agent

June 01, 2011 11:22 AM

There have been a lot of blogs lately about mandatory 20% down payments, QRM, and increases in FHA minimum down payment requirements.

There have been some lively and heated debates on the subject. While I commented and stuck my two cents in, for the most part it's moot in the Manhattan market.

Manhattan is an expensive market, it's also a market with high-paying jobs and high incomes. It is also a market with 50% of transactions all cash. Short sales, foreclosures, sub prime, REO, FHA not terms we're very concerned with.

Buyers here have always had skin in the game. A minimum 10% down for a condo and a minimum 20% down for a coop in addition to good income, assets and credit. Quality buyers buy quality real estate.

Real Estate is Local!

This post is for buyers and sellers in Manhattan, those fortunate to be in the Manhattan market that has avoided the worst of the housing crises. This post is about the end of High Balance Conforming loans in expensive housing markets such as Manhattan.

High Balance loans reduced in NYC For buyers that need financing, if you've been waiting now is the time. After October 1st 2011 it may cost you $100,000 more.

A few years ago after the financial meltdown, congress passed an emergency bill that raised the limits on conforming loans in expensive housing markets like NYC (Manhattan) as a temporary emergency.

We are still an expensive housing market but the temporary high limit ends October 1, 2011.

Currently the “temporary” limit on these loans is $729,750. This means that if you put 20% down on a $900,000 home, you can get a conforming loan in the amount of $720,000.

Effective October 1, 2011 this temporary legislation expires and is not expected to be extended. In October the amount will be lowered to $625,500 for a High Balance Conforming Loan.

What does that mean to Manhattan buyers? If you buy the same $900,000 home and put 20% down, your loan will now be considered a Jumbo loan. Rates on Jumbo loans are usually 1-1.5% higher, so if today you could get that loan today at 5% your payment would be $3865.12. The same loan amount using the Jumbo rates would be 6-6.5%, bringing your payment to $4550.89.

Over 30 years, that totals over $246,000! The other option would be to put a larger down payment on the property, about $100,000 more.

URGENT: High Conforming Loan Limits Reduced in NY in Oct.

If you've been thinking about buying and selling?

Now is a rare moment in time to buy and sell in Manhattan.

courtesy of:

Mitchell Hall, Associate Broker, The Corcoran Group

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Peggy Hughes/pha logistix, inc.

pha logistix inc - San Francisco, CA

SF NYC LA

Mitch... that's not good. Just because Manhattanites have the money, doesn't mean that money should be tied up in real estate. And, yes, it would certainly make money investing it the financial markets, but, its the consumer purchases that would be made with a portion of that money... that's important to create jobs...which is what the whole country needs - More jobs.

Jun 01, 2011 12:51 PM

Mitchell J Hall

Manhattan, NY

Lic Associate RE Broker - Manhattan & Brooklyn

Peggy, I agree it's not good. It also affects San Fransisco, LA and other expensive housing markets. I have buyers that need to close by October. This will affect many first time buyers because many homes here are more than $775,000. Under the new limit any home more than $775,000 will need a jumbo. On the bright side we're still at all time low rates and jumbos are becoming very competitive.

Jun 01, 2011 01:31 PM

Robert L. Brown

www.mrbrownsellsgr.com - Grand Rapids, MI

Grand Rapids Real Estate Bellabay Realty, West Mic

I'm from New York (Brooklyn that is). Those are some pretty hefty down payments there. Here in my market 700-900k can get you an extremely huge home and possibly with acreage. Like i've heard before real estate is relative to the area it sits. Hence the 3 L's.

Jun 01, 2011 01:38 PM

Mitchell J Hall

Manhattan, NY

Lic Associate RE Broker - Manhattan & Brooklyn

Robert, Brooklyn has become hot and expensive. I used to lose affluent buyers to Greenwich CT, now they want Park Slope and other parts of Brooklyn. You can still buy houses in Brooklyn with FHA loans and upper Manhattan but below 96th Street in Manhattan townhouses are at least $3million and up. Even subsidized "affordable housing" that I've sold such as HDFC coops with income restrictions require 20% down too.

Jun 01, 2011 01:57 PM

Donna Paul

Keller Williams Realty Gold Coast - Dix Hills, NY

Long Island Home Specialist,All About Real Estate

Mitchell: I work in the Brooklyn market; Most of the buyers are all cash buyers. We only have a few buyers that are purchasing properties with a small downpayments. The Brooklyn market is HOT, most of the homes doesn't stay long on the market. However, here on Long Island the market is so different.

Jun 01, 2011 03:25 PM

Brian Morgenweck

Power Realty Group, LLC Bergen County, NJ - Hackensack, NJ

Broker/Owner, GRI, CRS, ABR, SRS

Don't even get me started...

......

I always love the cash stats. I just posted my Bergen County Condo Review for May and 60 of the 142 units that closed during the month were cash transactions...so, 42%.

All the best in NYC!

Jun 01, 2011 04:10 PM

Brian Doubleday

Brian Doubleday - IML RealEstate - Orange County, CA Broker - Ladera Ranch, CA

Ladera Ranch, Foothill Ranch, Lake Forest, Mission Viejo

Great information, thank you for sharing, you've brought up an interesting point how different our markets can be

Jun 01, 2011 04:27 PM

Ruthmarie Hicks

Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605 - White Plains, NY

This has implications for Westchester too. So many fence sitters. I've mentioned this issue and they just ignore it like it will "go away." But that's not going to happen. They keep waiting for the bargain of the century - soon they will have to put up more cash....but they can't say they weren't warned.

Jun 01, 2011 04:47 PM

Jennifer Fivelsdal

JFIVE Home Realty LLC | 845-758-6842|162 Deer Run Rd Red Hook NY 12571 - Rhinebeck, NY

Mid Hudson Valley real estate connection

Michell your post prove the point that markets are truly local. NYC market is unique in itself. This is a timely post giving consumers information they can act on before the program ends in October. A 1-1.5 percent jump in rate could mean the consumer would not be able to afford the second home in my area :)

Jun 01, 2011 04:49 PM

Mitchell J Hall

Manhattan, NY

Lic Associate RE Broker - Manhattan & Brooklyn

Donna, Brooklyn is HOT! Amazing there is so much cash around. Interesting the shift. Long Island to Brookklyn.

Brian, There is a lot of cash in the region. Interesting how Bergen County, Brooklyn and Manhattan have cash buyers but not on Long Island.

Ruthmarie, It has implications for the whole area and any market with high priced homes. Are there cash buyers in Westchester? We have a lot of foreign cash buyers, investors that are buying condos.

Jennifer, How true, they need that extra money for their second home in the mountains in your beautiful neck of the woods. It's summer too they should be buying there now.

Jun 01, 2011 06:00 PM

George Bennett

Inactive - Port Orford, OR

Inactive Principal Broker, GRI

Thanks for the headsup & the insight to your local market.

Jun 01, 2011 06:44 PM

Cheryl Ritchie

RE/MAX Leading Edge www.GoldenResults.com - Huntingtown, MD

Southern Maryland 301-980-7566

Fifty percent cash stopped me in my tracks. I wonderif we break five. Now I have to go see the reports to check.

Jun 01, 2011 09:24 PM

Gita Bantwal

RE/MAX Centre Realtors - Warwick, PA

REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Thank you for the information. I hope it will not affect the market adversely.

Jun 01, 2011 11:12 PM

Mitchell J Hall

Manhattan, NY

Lic Associate RE Broker - Manhattan & Brooklyn

Hi George, Thanks for stopping by

Cheryl, I don't know where they all get the money. Cash buyers are mostly foreign buyers or empty nesters that sold their big houses downsizing to condos.

Gita, Thanks I hope not, I get different stories from different mortgage brokers.

David, I just spoke to a mortgage broker from Met Life (now they are doing mortgages) he told me a jumbo is only another 1/4 point from a conforming loan so that's not so bad.

Jun 02, 2011 12:22 PM

Rob Spinosa

US Bank - Larkspur, CA

Mortgage Loan Originator, Marin County

Great post and important information for every seller who entertains an offer between now and October. Here in Marin County, CA, we will also see our high balance conforming go from $729,750 to $625,500. This equates to a 33% decrease in borrowing capacity for buyers in that range. Sellers who have homes listed between $780K and $910K need to know THE TIME IS NOW. The legislative cavalry is not coming --- in fact it's going the other way --- and with rates where they are and the high limits still in place, this is perhaps the last, best time for your buyer to obtain the loan to acquire your home listed for sale.

Jun 03, 2011 02:56 AM

Mitchell J Hall

Manhattan, NY

Lic Associate RE Broker - Manhattan & Brooklyn

Hi Rob, Thanks for your input. The buyers I'm working with "get it" but some sellers in that price range want to wait until Fall because summer is traditionally slow here because of vacations and summers at the beach. They don't realize it may limit their buying pool and serious buyers in that range want to move fast. Now really is the time.

Do you know if the loan has to close by Oct.1st or the property only needs to be under contract? I have buyers buying new construction with anticipated mid October closings. When developers say October it usually means January ;-)

Jun 03, 2011 03:29 AM