Trickle Down Jumbos

Education & Training with RealtyU

This is a play on words to some extent.  The Fed has raised the Jumbo amount to over $700k in some areas.  The Fed also believes that by raising the Jumbo loan limits that there will be much more refinancing over the next several months making late spring and into the summer a better economic picture.

The play on would is from the phrase "Trickle Down Economics" the theory that if those with means do not spend than those with no means do not work.  How much will the ability of $700k plus loans being refinanced weigh on the economy ... here is some simple math.

If one loan is refinanced and saves the owner of that home 1% that is an extra $7,000 spendable income into the economy per year.  In the state of California alone that could mean a huge impact since the average home price in many areas is outside the previous conforming loan limits.  Having a higher limit allow "Average" home owners to be able to refinance.

Let's wait and see.

Comments (1)

Jonelle Simons
Windermere Real Estate - Park City, UT
interesting thought - I think it will definitely help a few of those who are "in trouble" this year... But we'll have to wait and see what the real, long term effects are!
Mar 07, 2008 01:50 AM