The Office of Federal Housing Enterprise Oversight (OFHEO) recently announced conforming loan limits for 2008 will remain at 2007 levels. The maximum 2008 conforming loan limit for single-family mortgages will remain at $417,000, the same as in 2006.
The conforming loan limit determines the maximum size of a mortgage that Fannie Mae and Freddie Mac can buy or guarantee. Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan, increasing the monthly payment and negatively impacting affordability for households in California.
The cost of financing a home remains out of reach for many households in California because of the low loan limit. For properties in the "high cost areas" of Alaska, Hawaii, Guam, and the U.S. Virgin Islands, the loan limits are 50 percent higher.
"At more than $568,000, the median price of a home in California is more than 2.5 times the U.S. median of $221,000, yet California is not recognized by OFHEO as a 'high-cost' state," said C.A.R. President William E. Brown. "California still has the third highest home price in the nation, compared with Hawaii at seventh, and Alaska, which ranks 39th in terms of median home price. Yet Alaska, Hawaii, Guam and the U.S. Virgin Islands are recognized by OFHEO as 'high-cost' areas."
"With a 20 percent down payment, the highest-priced home one can buy with a conforming loan in California is $521,250, $44,750 below the third quarter median price of $568,130," he said. "Fifty-five percent of all home sales in California exceeded the $521,250 threshold in the third quarter. With a 10 percent down payment, even fewer buyers can qualify for a conforming loan."
With conforming loan limits unchanged, California homebuyers need more money down and/or a higher income to purchase a home, according to Mark Burns, president of the Silicon Valley Association of REALTORS®.
"With median home prices in Santa Clara and San Mateo Counties above $700,000, the Peninsula and South Bay would benefit greatly from an increase in conforming loan limits," said Burns. "First-time homebuyers and communities most impacted by the credit crunch would gain the most from higher loan limits. We will continue to urge our elected officials in Washington to act on increasing all federal loan limits for California."
"Now is the time for the U.S. Senate to pass legislation allowing regional adjustments to Fannie Mae and Freddie Mac loan limits and to modernize FHA loan programs," Brown said. "This critical legislation is a key step to allowing families in California an opportunity to climb the first rung of the homeownership ladder."
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.
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