Recently, the Federal Government initiated regulations that will have a huge effect on the ability of qualified buyers to purchase a home. But, have they gone too far? Are these new regulations helping or hindering the real estate market? Becuase it is clear that the economy is dependent on jobs and housing, any effort to hinder qualified buyers from buying a home is detrimental to the 9 percent-plus unemployment rate.
Credit scores are required to be 700-plus with a 20 percent down to qualify for “good” interest rates. Sixty to 70 percent of all loans have statistically had less than 20 percent down. Even though the reports consistently highlight homes that are underwater, the majority of homeowners are still making their monthly payments and are not looking forward to default. To make rules that hinder everyone is not in the best interests of our country.
“We must be better stewards of the U.S. housing finance system if it is to thrive and effectively serve American home buyers and mortgage investors into the future,” said NAR President-Elect Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami.
“Repairs to our current housing finance structure must be made, but we must be careful that changes to the system do not come at the expense of homeownership opportunities for Americans,” Veissi added.
According to data from a National Association of Realtor survey, reduction to the conforming loan limits is already impacting mortgage liquidity. Consumers who are above the lower loan limit are experiencing higher interest rates and are facing higher down payment requirements.
On Sept. 30, the FHA and GSE loan limits were allowed to decline in 669 counties in 42 states across the entire nation.
In King County, loan limits have decreased from $567,500 to $506,000, a decrease of $61,500. This will have lasting effects for this area. The higher loan limits with the restrictive underwriting guidelines in effect now have already made it difficult for borrowers to obtain affordable mortgage financing
The Eastside has a large supply of homes over $700K that will be directly affected. Other areas face similar problems. With the Feds failing to approve maintaining the conforming limits, homes listed above this range will have problems finding buyers for their home. Is this beneficial to the economy?
“For hundreds of years, this country has understood the value of homeownership because it helps families build wealth, supports community stability and contributes to our economy. We need to make sure that future housing policies continue to reinforce our long-standing value of homeownership, for the future of our families and our country,” Veissi said. "As a result, all of us need to let our legislators know that their attempts to help the housing market are making matters worse.”
Latest NWMLS statistics as reported by Windermere Real Estate:
- Inventory is down 25 percent from last year at the same time.
- Pending and closed sales for September are up compared to the prior year.
- There are 3.8 month's supply of inventory. A balanced real estate market is defined as three to six month's supply of inventory.
Distressed properties (bank owned or short sales) represented 32 percent of the sold properties in the 3rd quarter of 2011 compared to 26 percent a year ago. The high percentage of distressed sales is continuing to put downward pressure on pricing.