In a recent article in Realty News, Blanche Evans commented on something we're running into daily...that loans are bottle necking the housing market.
The elimination of subprime loans is being made worse by the large point spread between conforming and jumbo loans of as much as two percent.
The fact that sales are being restrained by the high cost of jumbo loans is obvious from the days on market - it took 53 days to sell a home in California a year ago. In March 2008, it takes only four more days to sell. What that shows is demand is there, but it's being subverted despite the attraction of much lower housing prices. The problem has to be in loans. If mortgage interest rates rise, that will take more buyers out of the market, raising inventories further.
The good news is that loan rates could fall again. If inflation is cooled and the dollar gets the support it needs from the Federal Reserve, mortgage interest rates will come down again, says mortgage expert and author David Reed. "A lot has to happen, but rates could dip below 5.50 percent or lower over the next several weeks."
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