expiring conforming loan limits

funny...all the talk has centered around the $8K tax credit; seems to me that the higher limits are more relevant to our market.

cetainly all ny metro area will be affected by this--if we revert to the old appx 300k limit, that is not good for nycre, cept of course in lic or in toll projects

Higher conforming loan limits are not expired yet. Banks are currently happy to finance up to $729,750 -- it's more that they're rushing us to get those deals closed by the end of the year.

And it's not a done deal that there won't be some sort of renewal; it's just that no one knows.

Third factor that is causing the lower levels to move is the idea that Fed will taper off its purchase of mortgage-backed securities in 1Q 2010, so although it's tough to forecast, expectation is that interest rates will rise in 2010 even if the Fed funds rate stays the same.

Get 'em while they're hot, kids.

ali r.
{downtown broker}

ali, i said by the end of the year. and i got my information from mortgage insider, which covers CA generally, but i'm not certain why the issue of ability to resell mortgages would be any different here. i would think the uncertainty surrounding mortgages, on all levels, would explain a good deal of the current sales activity.

i'm assuming there will be a renewal, but i imagine it would be a tough sell to continue them at the current levels, given that housing prices have declined by such a large percentage since the limits were extended. however, i am constantly amazed at what this administration/congress will do to prop up housing prices, so nothing would really shock me at this point.

well, AR, I agree that the administration is propping up prices on the low end -- but it's so not relevant to any housing you would be seeking, because the market above, say, $1.1 million is stalled due to other lending problems that the administration is NOT doing anything about.

Did I tell you our latest story, that we were the selling broker on a 2-BR condo at just under $1.2mm, and the buyers couldn't get a loan for $600K because it was a second home (purchase for their kid)?

They ended up just sitting down and writing a check for the whole thing.

--the other AR

thankfully i'm not seeking any housing at the moment. this is pure spectator sport for me.

i do recall your saying something about how disconcerting the AR is, given your initials. but we must remember that neither of us is "the" first AR. agentrachel has that honor.

FR: Do you think your buyer would have started in that price range if they knew ahead of time that they couldn't get the loan? This post is a shocker to me because I assumed that I would by able to get a loan even though I have another property. My plan was to get the 729 thou conforming loan and pay cash for anything above that. So my purchasing power would come down dollar by dollar with the lowering of the conforming loan. I also just assumed that I would be able to get a loan because I was looking in a range where the bank could see that we could cover the entire purchase in cash if we needed to --- but it just doesn't make economic sense to do that. These people obviously had the cash in the bank too but it didn't mean anything. Maybe it is a question of credit rating but nevertheless, your post is sobering news. If the cash buyer loses purchasing power in this market, then certainly prices will have a lot further to fall. I am currently looking for a one year rental to wait for the market to come down a bit. This one post may have put me in the renter-forever column.

apt23 -- the current loan market makes NO sense to me, because hubby and I just bought this summer without selling our first property, and on top of that, I'm a freelancer.

So why would a bank want to loan me (who is not rich) $500K, but not loan $600K to a condo buyer who literally had millions in the bank?

I think the true takeaway is that if you're thinking about buying, it's more important than ever to start at the beginning -- and the beginning is sitting down with your CPA/mortgage broker/real estate agent and figuring out what a good budget is, not by paging through Web listings and thinking what looks pretty.

On the flip side, sellers agents are pre-qualifying harder.. so don't be surprised if you (or your agent) gets quizzed a little before you get into see the property.

I just showed a $2.4 million property to a Goldman wife -- but since she knew she only wanted a high-conforming-loan-limit loan, and only wanted to put down a million or so cash, why did her real estate agent bring her? I could have explained on the phone that my sellers won't take $1.7 -$1.8mm and saved everyone an hour.

ali r.
{downtown broker}

maybe she thought she could get it for $1.8 million?

Conforming for NYC is going from $729k to $624k or somewhere around that.

FP: I'm puzzled that your 1.2m buyers couldn't get a mortgage. I had no trouble getting refi-ed recently.

And FP: I don't get the GS wife issue either. She could have gotten a conforming loan and then turned around and applied for a HELOC.

If it drops, hopefully it will drop to the intermediate $625k and not all the way down to $417k. $417k will probably mean lower prices for the housing in the 600k-910k, which was previously propped up but lower interest rates.

by, not but in the last sentence

You can get a 10/1 ARM right now for a very good rate for anything less than $1M, if you put a good amount down. I recently got a 5% rate on a loan amount above the (current) conforming loan limits. So there are other options if you look hard enough.

FR: As a buyer, allow me to defend Mrs. Goldman for a moment. If she is informed -- perhaps a SE inside?-- she might realize that there are many 20 -30% plus price chops listed on a lot of these threads. So it is not such a stretch to think that you could extend your search range by that amount. Secondly, you never know when love will strike. Being a Mrs. Goldman is pretty much like money in the bank. Mrs. Goldman, like myself, probably has the means to buy out of her target range if she really found something fantastic. But it would have to make sense for her on a lot of levels. Clearly it didn't in this case, HELOC or no. Finally, you just never know what will transpire. Your client will not accept 1.8 now. What if the apt doesn't sell for 200 days, would they change their thinking? What if their circumstances change? If there is a committed buyer in this environment it can only be an extremely wealthy cash buyer who cares not about price or all the Mrs. Goldmans - a very exclusive club. She now knows what the apt is like and if the price drops, you can call to inform her. In which case your time would not be wasted at all.

I was only prescreened once when agent asked is I was willing to pay ask because the seller would not accept less that a percent or two off ask (btw, 20% above the 2007 price). It was at the lower end of my range and I could have paid cash for it. The apt price has since been dropped by 3% and it has been on the market for 106 days and counting. I will be watching to see if those firm buyers only accept their original ask. I doubt it.

miette: name your bank, pls!

apt23: I'm sure that's what Mrs. Goldman's agent was thinking: maybe she'll love it.

As far as pricing, I get that we have been in a Wild West period where it was tough to see what an apartment would clear at -- so it made sense for buyers to lowball and try to get lucky. With the market (somewhat) restarting this summer, though, we have comps now, so it's easier for an agent to make a declaration as to what an apartment will clear at, and have it look like a supported statement rather than an assertion.

that's not to say that there aren't still crazy 2006-era list prices out there; there are. I just think it's easier to identify what's a "rational" list.

There are big variables, though. Dollar is very weak and NYC employment is shaky; I think NYC condo prices still look expensive to buyers holding dollars. We may have to go through a media cycle of foreign buying/ articles about foreign buying/New Yorkers getting bonuses, before New Yorkers jump in again.

I would be interested to see what happens to the apartment you have your eye on too, but IMHO in a world where the average unit takes 7 months to sell, 106 days is nothing.

But a lot depends whether it is co-op or condo. My listing is a condo, so if it does not sell in the next 200 days (heaven forfend) my owners would rent it out.

ali r.
{downtown broker}

Ali: Astoria Federal (via a mortgage broker).

Here's a link. (And no, I have no affiliation with them.) Looks like the good 7/1 and 10/1 rates are offered up to $1,500,000. http://www.astoriafederal.com/cgi-bin/nymort.pl

At least a little good news today. Looks the conforming loan limits will stay put for another year

http://www.menafn.com/qn_news_story.asp?storyid={E97DF294-99D5-44A7-84B0-693EF8D61B45}

milkman, that may be good for buyers, but i'm not so sure it's good for the taxpayers.

http://www.calculatedriskblog.com/2009/10/fannie-mae-delinquencies-increase.html

AR, i am not certain i see the connection between higher loan limits and increased delinquencies. i assume that the vast majority of these delinquencies are loans that were underwritten during the bubble days. of course, some of the loans made post lehman are going to be delinquent, but given the general tightening of credit requirements, i would think that the new loans are going to be in better shape.

without the higher loan limits, i would think that the upper portion of the under $1M market in nyc would get hammered.

milkman, au contraire my friend. the new FHA loans will be giving subprime a run for their money.

they are horrible. i'll try to find the link i posted earlier on the predicted failure rate of the new conforming loans. even i was surprised at how awful they're still underwriting. the administration is desperate to goose home sales.

i don't know how they're performing specifically in the NY market, where it is conceivable that things are tighter but i just don't know, but nationally this is a fiasco.

AR, from my understanding FHA backed loans are not the same as loans bought by fannie/freddie. the loan limits apply to loans that fannie/freddie buy and hold, but do not guarantee.

i agree the FHA guaranteed loans are a disaster and the FHA will need a bailout. 3.5% down, really?!?!

milkman, i agree that the graph that i posted wasn't particularly on point. it was one i had recently seen.

but you'd be AMAZED at the percentage of conforming mortgages that are now being backed by FHA. i need to find the figure, and this sounds insane, but i think it's over 75%. i'll have to look it up, because i hate to provide misinformation. but i think that is correct.