Finally we are starting to hear good news about the housing market. Interest rates for Jumbo mortgages are down, the Fed will most likely drop rates again, banks are working with sub-prime borrowers to refinance their loans, and the government is giving us all a nice big check this summer. It's an election year; enjoy it while you can! Now if they could only do something about gas prices.
Overall the stimulus package "from what I have read in the papers" looks very interesting. The most important part of the package "I believe" for us living here in the Bay Area is of course the increase in the Fannie Mae/Freddie Mac loan limits from $417,000 to $725,000. This possible increase in the loan limit will allow banks to loan money for mortgages that is guaranteed by the federal government. So basically if you walk away from your loan, the federal government will step in to pay off the mortgage. That in turn makes these mortgage backed securities more attractive to investors. Thereby stimulating the secondary mortgage market once again, to participate in buying these larger loan amounts.
How does this affect you? As of today in California a 5/1 Jumbo mortgage is selling on average (according to Bankrate.com) for 5.65% with a .5% discount rate. Conventional mortgages are selling at 4.99% with same discount rate. The difference in the two mortgages is approximately $450.00 a month. Not only is that a nice savings every month, but it will also allow more people to qualify for loans.
That's the good news. The bad news is that for buyers as this stimulus package takes affect and more buyers get back into the market we will once again "however slowly" return to a sellers market. Over time home-buyers in San Francisco will see the incentives of today go away. Sellers will once again be in the drivers seat. Remember it only takes two serious buyers to increase that sales price. If you can, try to take advantage of the market relatively soon. There are some very good buys out there right now and depending on how quickly this package is implemented we could see an increase in demand when the spring selling season kicks in.
Michael Novia
South Beach Real Estate
415-637-2409 (24 hours)
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