It’s good to see a realistic voice in the wilderness. At first the increase in the conforming loan limit seemed like it might tip buyers into the market and prolong inflated housing prices.

But what you’ve described about ‘jumbo light’ or ‘junior jumbos’ is coming to fruition. I’ve been told that one of the major banks/lenders has notified brokers that these junior jumbos will not receive the same conforming rate but instead be graded on a sliding scale based on the amount of the loan (e.g. – add .25% between $417K -$500K, add .50% between $500K and $600K etc.)

Essentially the secondary markets aren’t going to buy these loans at the same rate. They perceive the risk as higher and aren’t going to get stung again after the subprime mess.

There’s so much confusion about this change that I’m guessing there will be a lot breakage in pending sales as buyers and lenders disconnect on the programs/rates/terms etc.

In this case, the market and lenders may ‘educate’ buyers through rates and high down-payment requirements.

http://walnutcreekcaliforniarealestate.wordpress.com/

I do not disagree that SF has been spared to this point, but we are not anywhere near the end of this correction. Are you not aware of the early 90? And no, this is not the same thing all over again – hell, it’s probably going to be worse (see David’s previous comments on interest rates then vs now – which I completely agree with).

And do you seriously believe statistics from the NAR? Come on. They, along with their “chief economists,” are the least credible in the RE industry. Case-Shiller and OFHEO statistics, which not perfect, are much more reliable and relevant than the NAR’s data. Even DataQuick’s numbers show the obviously strong downward trend in sales volume (and since when do prices not follow that trend?).

SF is not immune to the inevitable decline, and if you are going to use the “desirable area” phrase to support your claim, that clearly shows you are not an economist either. “Desirability does not drive pricing – fundamentals and market mechanisms do.

If you had any knowledge of this legislation you would not speculate that Solano County would be included. As far as evidence that prices are holding, how about this from the NY times, dated 2/15.

Some Cities Are Spared the Slide in Housing
Many people are aware that a handful of big-city markets, like Manhattan and San Francisco, have largely resisted the real estate slide.
In figures released on Thursday covering 150 metropolitan areas, the National Association of Realtors said that median home prices were falling in 77 markets — but rising in 73.
http://www.nytimes.com/2008/02/15/business/15homes.html?em&ex=1203310800&en=0348e4058a897f71&ei=5087

I am not a real estate bubble head. But lets be realistic here. We now have an economic climate more like the 70s than the 90s with inflation again, in fact today the price of oil closed at an all time high over $100. This is why real estate is not going to collapse in the desirable areas like so many bitter posters that post on these blogs assume. The conforming limit increase will have an affect on housing prices but they are going to recover anyway. Nonetheless, its only fair that the bay area stops subsidizing fannie and freddie for everybody else. There is no real risk in this proposal, bay area real estate (SF, Peninsula and west san jose) are holding, defaults are nonexistant. Good proposal on Congress’s part.

My last word on spelling/grammar – it adds credibility to what anyone says/writes. Just because this is a blog doesn’t mean it should be sloppy. “Geez” was the first word you butchered – many “non-slang” terms followed. Sorry, it’s a pet peeve of mine.

Know nothing about this? You have not posted anything thus far that I am not aware of or have not yet read. Obviously, we draw different conclusions from the data and reports. Nothing wrong with that – that is what this is about.

I am very familiar with Calculated Risk and related high level blogs (read them daily) and I do agree that zip code is a better measurement – definitely makes more sense. I also know the entity responsible for calculating these medians and areas have never even produced such numbers, so this is going to be interesting to see what they do.

And my counterpoint to your claim of rising markets was listing counties of the “northern calif bay area” (your words, not mine) that are indeed not rising. Read: Solano, Alameda, CoCo. The lenders are correct in assessing Alameda, CoCo, Solano, and others are declining markets, because they blatantly are!

I would love to see whatever data you have that supports a “rising market” as you suggest. Not DataQuick, not Case-Shiller, not the OFHEO, and not even the NAR/CAR stats support this.

In reference to your response to David:

Are you saying these low-foreclosure-rate, currently stable parts of the Bay Area (assuming you mean Marin & SF) have jumbo loans that were highly scrutinized with solid underwriting? What makes you think that? As David has mentioned many times here on Redfin, SF will be the last to decline (it’s how the geography and “flow” of decline operates). Just because it hasn’t hit SF yet doesn’t mean SF is strong and built on solid underwriting.

No there is no free lunch for the economy but this is a dollar menu lunch because there is not much in terms of risk here, and a fairly high payout. This is a group of people paying too much for their mortgages today, just due to a crack in the system that requires them to do so. My personal preference would be to index fannie and freddie to median home prices nationally. That would reduce many conforming limits in the flyover states and some parts of central california where relatively high conforming loans have high default statistics.

Anyway the bill specifies 125% of an “AREA’S” median price. How to determine area is not specified yet, and will be published by HUD 30 days after the bill was signed, so Mid March. The only 2 approaches being discussed for determination of “area” are
- County
- Zip Code

From the blogs I read, zipcode appears to be winning for obvious reasons.

From the Calculated Risk blog,
“Nationwide, the increased limits will affect only about 20 or so higher cost areas. I’m told only 6 areas will probably get the full increase. ”

So worse case, thats 20 or so counties with 6 getting the top 729K. Let me speculate on those 6 counties right now
- San Francisco
- San Mateo
- Santa Clara
- Manhattan and vacinity
- Santa Monica/Westwood
- Marin

This is if the 6 “areas” are full COUNTIES which is likely not the case. The county approach to median is not popular, since zipcode is more representative.

So from your blind speculation above:
Alameda, Solano, Contra Costa are not included. Fairfield, Brentwood, Oakland not included.

next time do some research before you post, it is clear you know nothing about this legislation.

There is no free lunch, there is no “free shot in the arm” for the economy.

It’s time for everyone to pull out their history books, open the page to 1989 and read on for what happened to the SF R.E. market. Yes, even SF proper saw prices decline, and that was off of a smaller run-up than we saw from 2000-2005.

Again, what makes you or anyone think it will be different this time? Rates can’t drop much more, incomes are stagnant, and we’re either in or soon will be entering a recession. How does that help prop up R.E. prices?

First, GEEZ (not “geeze”) Michelle… can you please hit spellcheck before you submit your comment for the rest of us? Or have someone else proofread your draft first. Geez!

Several questions for you:

Exactly which “specific markets” were these jumbo loans approved for?

Are you really saying Alameda, Contra Costa, and Solano counties are not “declining markets”? Yes, Michelle, they are a living part of the area you call the “Northern California bay area.” Rising market? Check out Oakland, Brentwood, or Fairfield for your so-called “rising market.” Hilarious.

You seem to be focused on San Francisco-Proper when many of my points, as well as others’, address the “Bay Area” as a whole. San Francisco does not = the bay area, FYI.

I am well aware of foreclosure statistics, and San Francisco has yet to be hit hard. San Francisco will be the last to suffer – no surprise there.

Looking forward to your next comment. Thanks for finally chiming in.