Lots of economic and real estate news lately...let's discuss a few
recent developments and how they might affect you or the housing market.
1- Economic Stimulus Package: starting in May of this year you could see
some pocket money sent to you courtesy of the US government to the tune of $600
per person and $1,200 to married couples (Click Here
to find out exactly when your check should arrive). However, those
single tax filers making between $75,000 to $87,000 are in the gray
area and $87,000 earners or higher won't be receiving anything from the
mailman this spring (the phase out for married couples is between
$150,000 to $174,000). Now remember this money is not intended for the
savings account...motion creates motion...so go spend it- hopefully not
all in one place!
2- Conforming Loan Limits:
home loans are divided into two categories...conforming and
non-conforming otherwise referred to as "jumbo loans". Until recently,
a $417,000 loan amount (not purchase price) is the cut-off between the
two categories. If you are a buyer in the price range of $418,000 or
higher, then hopefully you had a downpayment ready to keep the loan
amount to $417,000 or less to qualify for the better rates. Part of
this stimulus package contained a measure to increase loan limits in
high cost areas, like San Diego. What this means is better rates for
loans over $417,000 as they will no longer be labeled as "jumbo". The
new cut off for San Diego is $697,500 but this change is only in effect
until the end of 2008...unless some permanent guidelines are put into
place. Additionally, don't expect to see identical interest rates for a
loan balance of $697k and $400k...investors and Wall Street will decide
how much of a premium needs to be placed on these newly packaged
"conforming loans".
3- Federal Interest Rates:
The Fed has made the most aggressive rate cut since 1982 last month
followed with another 50 basis point cut. Then this past Tuesday they
lowered the federal fund rate another 75 basis points. What this means
without getting too complex with inflation talk, trade imbalance woes,
the bond market, etc. is that money is cheap to borrow right now and
buyers will see their purchasing power extend as interest rates remain
near some historical lows. There is a very complex relationship between
Federal Rate Cuts and interest rates on home loans. Many would think
they are directly related when in fact they often move in an opposite
direction. Bottom line, the markets are very volatile right now- we see
movements in a couple days that would normally take months to produce.
If you are considering a purchase or refi you should have your lender
on speed dial.
