By Robert Freedman, senior editor, REALTOR® Magazine

An op-ed that the Wall Street Journal ran earlier this week (on the eve of the REALTORS® 2011 Conference & Expo in Anaheim) dismisses concerns of NAR and other organizations as well as members of Congress over the drop in FHA and conforming loan limits at the end of September. The editors say the new high-cost loan limit of $625,500 (down from $729,750) has led to only a 1.3 percent drop in transactions, suggesting that concerns over the lower limits’ impact haven’t been borne out. In support of their point they cite House Financial Services Chairman Spencer Bachus (R-Ala.) as saying “the lower loan limits only affect a very small slice of wealthier homeowners in high-cost areas.”

But The WSJ editors paint a partial picture of the issue at best, because that 1.3 percent only appears to represent impacted transactions as a result of the high-cost limit drop.

What they don’t address is the impact of the change in the loan-limit formula to 115 percent from 125 percent of the area median home price. When that part of the drop is factored in along with the impact on move-up sellers who can’t sell, the impact on home sales is probably three times as high, about 6 percent, NAR researchers calculate. And that’s on a national basis. Obviously some markets are being hit much harder than others.

The editors also dismiss NAR’s point that the higher limits are only intended to be in place for another year or so to give housing, and therefore the broader economy, a chance to recover. They say once the temporary limits expire, real estate interests will just return to Congress seeking another extension. But the higher limits were passed in 2008 as part of emergency legislation, and that emergency isn’t over yet. As NAR President Ron Phipps says in a letter that appeared next to the WSJ op-ed on the day that it ran in the newspaper (although it was in response to an earlier story about McMansions, not the op-ed), “People across the country are trying to gain a foothold in these trying times. We need to give them the resources to do so.”

The WSJ editors are clear they don’t want the loan limits to go back up to their emergency level. It would be helpful, though, if they talked about the full impact of the loan-limit drop and not just the impact of the high-cost area drop, as they appear to be doing.