Time is running short for Congress to prevent FHA and conforming loan limits from reverting back to 2008 levels. The current limits expire Sept. 30 and will drop from 125 percent of the area media home price (and a top limit of $729,750) to 115 percent of area home price and a top limit of $625,500. If Congress fails to extend the limits and they drop, the real estate industry (which is united in opposing a drop) will certainly look for another opportunity later in the year to get them back up.
Regardless of what Congress decides to do, it’s clear there’s a lot of information on the issue in the media that’s simply not helpful. It’s not uncommon for current loan limits to be described as helping higher-cost housing, but as NAR has been trying to make clear for almost a year, a drop in the limits will be hard on middle-class buyers and sellers, because maximum conforming loan limits will drop in markets throughout the country. The issue is so often expressed as a Boston, New York, San Francisco issue, but in fact buyers and sellers will feel the impact at all price points in almost 670 markets in more than 40 states.
Allan (“Dutch”) Dechert of the New Jersey Association of REALTORS® captured this squarely when he testified earlier this week (see 44-second video above) before a panel in Congress that was looking at ways to improve the disposition of REO properties. Dechert, the president of NJAR, brought the impact home to the panel’s chairman, Sen. Robert Menendez (D-N.J.), when he explained how the lower limits will hit the middle of the market as much as the higher-end market. In New Jersey’s Cumberland County, Dechert said, the drop would be more than $100,000, and Cumberland is a middle-income market.
How will dropping loan limits now help stabilize housing markets? It won’t, and that’s the message that everyone in the housing industry, including the home builders and the REALTORS®, are trying to get across. But time is running out.