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REALTOR®: Realtors Say Permanent Loan Limit Increase Would be Good for Homeownership

Wednesday, June 18, 2008

Making the temporary loan limit increases authorized by the Economic Stimulus Act of 2008 permanent will give families in high-cost areas equal access to fair and affordable loans on a continuous basis, according to the National Association of REALTORS®.

"Congress created Fannie Mae and Freddie Mac to provide liquidity and stability to the mortgage markets. Making the Economic Stimulus Act limits permanent will significantly boost home buyer, lender and investor confidence and will bring more families in high-cost areas back to the marketplace with greater access to affordable financing," said Vince Malta, chair of the National Association of REALTORS®' Public Policy Coordinating Committee, in testimony before the House Financial Services Committee. "This will also make more affordable interest rates available for families regardless of where they live because of the added liquidity to the mortgage market. We believe the result will be additional sales, lower inventories, and stronger home prices."

Research studies have found home prices have the biggest impact on foreclosures, and strengthening and stabilizing home prices would reduce foreclosures, Malta added.

For high cost areas like California, the increase in conforming loan limits has been beneficial to first-time home buyers. "Recent decreases in home prices in the state have improved the housing affordability level for California's first-time home buyers and have helped strengthen the housing market and boost buyer confidence," said Leannah Hunt, president of the Silicon Valley Association of REALTORS®. "Making the increase in  conforming limits permanent would provide stability in the housing market and bring American families residing in high cost areas within reach of the American dream of homeownership."

The California Association of REALTORS® disclosed housing became a little more affordable for first-time homebuyers in California in the first quarter of this year as the percentage of households that could afford to buy an entry-level home in California stood at 44 percent in the first quarter of 2008, compared with 26 percent for the same period a year ago. The minimum household income needed to purchase an entry-level home at $356,350 in California in the first quarter of 2008 was $67,830, based on an adjustable interest rate of 5.65 percent and assuming a 10 percent down payment. The monthly payment including taxes and insurance was $2,260 for the first quarter of 2008.

NAR estimates that adopting permanent high-cost area limits of 125 percent of the local median home sales price, up to $729,750, will allow more than 500,000 homeowners to refinance into lower interest rate loans every year, helping to reduce foreclosures by as many as 210,000. Additionally, this would generate over $35 billion in increased economic activity, strengthen home prices by 2 to 3 percent, increase home sales by up to 350,000 and save homeowners up to $600 per month.


The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Rose Meily at SILVAR Public Affairs, email , or phone (408) 200-0109.

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