Yesterday President Bush signed the economic stimulus bill into law. One of the key points in the Bill for the real estate industry was an increase in conventional loan limits.
The conventional loan limit has been set at $417,000 for the past 2 years. Loans over this amount are Jumbo Loans and are generally subject to higher rates and tougher underwriting guidelines. So, an increase in the conventional loan limit would make it easier for some homebuyers to get into more expensive homes and thus inspire some new property sales.
Initially the House of Representatives was contemplating an across the board 50% increase in the limit and even more in certain high cost areas. This would have raised the conventional loan amount up to $625,500 in Southeast Michigan and would have been great! The Bill that actually was passed by the House & Senate and signed by the President is an increase up to 125% of the median home price in that specific geographic area. The statistical median home price in our area is under $200,000 so the law has absolutely no impact on the conventional loan limit in Michigan. Ouch.
The good news is that the stimulus package is going to put money into the pockets of tax payers all over the nation because it includes a tax refund of up to $600 for individuals and $1,200 for married couples and $300 per eligible dependent children (there are some reductions for people in higher income brackets – talk to your tax advisor). This may generate some renewed economic growth and can’t hurt! The current market poses some great opportunities if you keep your eyes open and put in some extra effort.
Matt Carter at Inman News has more on the topic.
________________________________________________________Written by Ken Mascia
Oxford Financial, 248.644.1200
Visit Website
Search for homes in Oakland County
________________________________________________________
{ 1 comment… read it below or add one }
Russ 02.24.08 at 1:43 pm
This loan limit is immaterial, as you said. The stimulus means the same thing for METro Detroit as every other major american city:
The stimulus is a lifeline to the big banks and investors in debt instruments (including mortgages). The free money will simply be used to pay off debt by most. Increased loan limits won’t change toughened lending standards being instituted by the banks. $1000 is far too little.
Reality is that there is too much debt versus earned income in the US and many other western countries. There aren’t any painless ways out of this fix (certainly not monetary ones), and the pain to correct it must be shared by all: investors must accept some capital losses and significantly lower real rates of return going forward, corporations must accept lower profit margins by boosting wages and salaries (i.e. increase earned income for workers), and individuals must realize that low taxes are a thing of the past.
http://suddendebt.blogspot.com/2008/02/dutch-boy-finger-and-dam-inc.html
It means that President Bush & Co. are fools to even waste their time attempting this nonsense, and don’t correctly grasp the problem. Waaay too many houses are priced for the upper 25% of incomes in Detroit. We can’t all be in the top 25%. The price collapse in RE and similar assets is sticky but just getting started. It started sooner in Michigan than most areas. Note in your OC price stats that the truly wealthy areas prices held up while the poser rich areas experienced big declines.
It means you shoulld have placed your assets in investments where they can’t be diminished by teh misunderstandings & mismanagement of Pres Bush. and the debt default tsunami. Like euro-demonited bonds (Pres Cheney did this), foreign real estate (Bush’s advisors aren’t as dumb as he looks), TIPS (both Bush and Dick), commodities (gold / wheat / soybeans / oil anyone?), emerging market stocks. Even the currency right accross the border would’ve held its purchasing power.
NAR: Now is a great time to rent. Im waiting like a vulture. But this will take years to play out like every previous real estate cycle did.