Two articles this morning lead me to conclude that housing still has no upside. The first from the NYT the other from Bloomberg.
The Times reports on what I (and others) have been warning about for some time. The lending limits for the GSEs and FHA are scheduled to be cut on 9/30/2011. Bloomberg reports on a growing trend, seller financing.
The GSE lending limits were increased as part of the 2008 HERA (bailout) package. Housing was in free fallback then; there were no private lenders. It (sort of) made sense to increase the limits in the overall effort to stop the economy from tanking.
The limits have already been extended once (end of last year). I’m sure that there is going to be a push by some in Congress to extend them again. I think the effort will fall flat. Fannie and Freddie have cost hundreds of billions. Extending the limits just keeps them alive and helps them grow. That is not a very popular position to take one year before an election. The additional argument will be made that the higher limits just support rich people. To some extent that is true.
The big change in limits will come from the areas that have the highest home values. These are pretty significant drops:
Monterey Co., CA down $247,000 (34%)
Monroe Co., FL down $201,000 (28%)
Hawaii Co.,HI down 250,750 (41%)
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