Housing Market Stimulus Plan
Washington’s new economic stimulus plan, made public this week, contains key provisions designed to stimulate the housing market. The greatest impact of this proposal is expected to occur in those markets that need it the most, according to CNNMoney. The proposal submitted by Congress and the Bush administration would place the majority of the focus on the hardest-hit markets like California and Florida by making it easier to purchase a house with a selling price in the range of $417,000 to $625,000.
For years, anything above $417,000 has been considered a Jumbo Loan, and those are harder to get than smaller loans, which are called conforming loans. So the current proposal would raise the threshold separating conforming loans from jumbo loans from $417,000 to $625,000. That makes a huge difference in markets like Califoria, as California’s median home price is more than $400,000. Florida home prices have a lower median home value, in the low $200,000s statewide, but in the major metropolitan areas of South Florida, the median is much higher ($362,000 in Miami-Dade, for instance). For these states, and for other areas in the country were a large percentage of homes are in the jumbo loan range, this stimulus package would make a large number of homes easier to purchase.
Conforming loans cannot be purchased by Freddie Mac and Fannie Mae, which are quasi-government corporations created by congress, by whose power they were charted with limitations against purchasing jumbo loans. These corporations have kept the market strong for conforming loans, giving lenders more confidence in these loans. But the private market lost much of its appetite for jumbo loans during the subprime scare, and so lenders are less interested in issuing new jumbo loans, and thus, they are harder to come by for borrowers.
Congress, by temporarily redefining the jumbo threshold, can restore lender confidence in higher-value loans. This is what they are proposing. One economist’s reaction: “It’s about time.” I fully agree.
Tags: economic stimulous, housing market, jumbo loans, US economy
February 4th, 2008 at 10:42 am
Do you really think this economic stimulous package will be approved?
February 4th, 2008 at 11:35 am
This package was approved by Congress, but the Senate is proposing changes to it. Whether these changes are good or not, it looks like getting the bill passed might be trickier than some had hoped.
HL Fisher - Fisher Realty
Saving You More
February 5th, 2008 at 1:05 pm
Hard to say what might happen in an election year. If I were a Democratic Senator, I’d be in no hurry to help Bush out with a short-term fix to the economy. The worse
things get between now and November, the Democrats will fare in the election. I’ll bet none of the Senators need any help getting jumbo loan financing.