Real Estate News Alert
Fellow Realtors, in case you didn’t know it…..obtaining a mortgage is about to become significantly more difficult.
Here is what Harris Real Estate University expects to happen:
* GSE (Fannie and Freddie) Market share to reduce from 95% to 40%. Think about that for a moment. When was the last time you had a buyer who DIDN’T use Fannie or Freddie for their mortgage.
* Reduce the GSE Loan Limit. The loan limit is $729,750 in the most expensive areas in the US. Expect the max loan limit to become no greater than $429,750.
* Increase the minimum downpayment for low income borrowers to 10%.
* For non-low income buyers the new downpayment will be 20%.
* Jumbo (Non-conforming) loans will require 30% down payments
* Obtaining a loan will be more expensive. In addition to the downpayment borrowers will need to come up with significantly more just to secure the loan.
* There IS a push away from homeowners ship and towards renting. The Obama Administration has stated that there should be subsidies for renters!
All of that is horrible news. What do we need to do to make drastic changes to the way the industry is going?
Well call it what you want, but this is bad news for home buyers. What do they want, all our real estate to be owned by foreign investors?! They don’t want American’s to own homes? So lets just hit the American people again in where it hurts.
Whats next?
This will probably push many more homeowners into an upside down, short sale position. When the buyer pool shrinks because people can’t save enough for larger downpayment and expenses and the max loan limit is reduced – even the high end professionals won’t qualify. If the administration comes up with some crazy rent subsidy or limit, even investors will turn away.
Tightening credit reviews back to the way they used to be is fine, let’s just not go crazy….greed and fraud will continually try to find a slot regardless of regulations…let’s put white collar auditors out there rather than penalize the general population.
I think that one secondary mortgage market must remain in our capitalistic economy. Two entities viz. Manie Mae and freddie confuses the general public. There fore it may be combined to one entity with better efficiency.
I guess Obama does not want to get re elected.
I’ve heard the doom and gloom before. High interest rates killing home ownership. (But we eventually had the highest home ownership in history) Savings and loan crises drying up mortgage money. John Q Public became an excellent source of mortgage money. FHA stepped in an stabalized the market, then began a wave of foreclosures in a magnatude never seen before the year 2000. But then we had this incredible source of funds called ‘Mortgage backed securities’ funded with wall street accounts. And home purchases soared. (Then soured as the pick a payment fiasco was born!) The resulting mortgage crises and collapse of prices gave a new wave of buyer the opportunity to get reasonable priced homes at attractive interest rates.
So, if we push investors out, reduce or eliminate the tax deduction for interest and taxes paid on a house, Stop the tax advantage for investment owned property, the price of real estate will crash. . . and hundreds of thousands will have a real opportunity to buy a home at realistic prices. People like to own what they live in. They like to own their cars. They like to pay off what they borrow.
Yes the transition will be difficult, but the last 5 years have not exactly been a cake walk. We will survive. Investors will still buy property, but only if they get a decent rate of return.
I expect to see our financing go from 30 year fixed at low rates to, 30 year amoritized, due in 5 , 7 to 10 years at slighlty LOWER rates because the land owner is shouldering part of the risk.
Thank you. Jerry
Classic government. They proved they can’t handle mortgages so lets turn everybody into a renter. Will give the renters subsidies which will make the cost to renting go up, and to levels you probably can’t imagine today. Investors (Wall Street) Wins.
Look at what it cost to go to college – this came after the governemnt decide to make college affordable and they did it with student loans, now it cost a bundle to go to college.
So it will pass that it will cost a bundle to rent.
And don’t forgrt health care – if the government passes anything with a name like Health Care Affordability Act then count on it you won’t be able to afford it for long.
We learned this lesson in the Real Estate industry….Big is NOT Better.
What does our HREU fearless leader have to say about this?
Hi Mary Lou,
I am sure there will be a toned down version of whatever happens with Fannie/ Freddie and the tax deduction.
For example, the elimination of the deduction will be for the ‘rich’ (those making $200k +)
The changes to mortgage financing are a much bigger issue. Fact is, higher down payments have proven historically to be a good idea. Problem is, so few have 5% down…let alone 10..20…30% down. Add to this the numbers of owners coming out of underwater homes (or selling with no net to them) thus, no down payment.
We will be in this type of market for years and years. I honestly see no reasons to believe that this corrective cycle isn’t going to significantly worsen over the next 24-36 months.
The real question is if folks have been so burned by real estate that they will question if they should even buy. Baby Boomers kids (oldest are in their early 30s) may find it perfectly acceptable to rent.
What do you think?
Tim
watch your spin on this… whereas ~95% of loans are now FHA, the gov’t wants this to move down to a more reasonable percentage of all loans given out by building up the conventional loan market. that is a smart move. let’s not put all our eggs in one basket.
Republican lawmakers began attach on GSE(Government Sponsored Enterprises)in February when they began holding hearings. The Republicans want less government involvement so this is part of the compromise. If the republicans get in the White House in 2012 I am sure we will see even larger cuts to those who need help.
After 42 years of experience in the business I have seen recessions, depressions, 17% mortgage rates and 3.5% rates, government interference and agent innovation. During the changes from 20% downpayment required in the late 60′s early 70′s to nothing down to again going backwards we found ways to put buyers and houses, and we will again.
We will get creative, add seller financing into the mix, partnership mortgages will again become popular. With all the money out there investors want to earn interest on their money and where better to put it than a mortgage portfolio. Maybe the unions will loan directly to borrowers versus just buy the loans from banks!
The weak will run to a “real job” and the strong agents will find a solution.
Give to RPAC and get involved if you do not like the direction the country is headed.