I understand that both federal and local governments are deeply in debt, but the bills aimed at generating funds by attacking the already precarious real estate market are misplaced.
There is a proposal before government regulators to require a minimum of 20 percent down on all residential transactions. If allowed to take effect, the rule would put home ownership out of reach for middle-income Americans. It would take the average family 14 years to save up the down payment to buy a home.
Steve Kim, from our in house lender, Princeton Capital, recently sent me information on another obstacle to the housing recovery. On October 1 of this year, the top limit for conforming loans is set to drop from a temporary $729,750 to the general $625,500, in our higher cost housing market. Since conforming loans are eligible for sale to Fannie Mae and Freddie Mac, they generally have the lowest rates. When this limit drops, borrowers who want a bigger loan will have to get a jumbo, which includes both higher interest rates and tighter guidelines.
According to a recent Harris study, 54% of Americans do not expect to see a healthy housing market until at least 2014.
We just don't need more hurdles to cross in this slowly evolving real estate recovery.
1 comment:
Increasing down payment requirements would definitely decrease housing demand, but that is not necessarily a bad thing. Leverage ultimately means risk, and if the government is subsidizing debt (via Fannie, Freddie, mortgage interest deduction, etc.) then they are introducing systemic risks. Mandating down payment requirements for conforming loans is one way of trying to balance the lending environment.
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