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FHA Loan Amounts are Shrinking, is that bad news for the Santa Clarita Real Estate Sellers and Buyers?

by Connor T. MacIvor on September 28, 2011

FHA loan limits are shrinkingWe have been published as Santa Clarita Real Estate agents once again in The Signal, the Santa Clarita Local Newspaper.  It is always our pleasure to speak about the status of the Real Estate Market.

Today the questions as posed by Jana – The Business Reporter for the SCV Signal were as follows.  This includes my responses as well:

Effective Saturday, Oct. 1, Fannie Mae and Freddie Mac will cut the size of loans they buy from lenders, forcing some future buyers into jumbo loan status.

In Los Angeles County, the loan limits for a single-family home in L.A. County is $625,500.

 1.    How much of an impact do you expect this change to have in the Santa Clarita Valley market?

As of Today, Located in the Santa Clarita Valley, cities of Valencia, Stevenson Ranch, Saugus, Newhall, Castaic and Canyon Country, we have 1338 total active listings that are on the market for sale.  Those include Single Family Residences, Condo’s, Town-homes and Manufactured homes.  When taking the new FHA limits into account we have to see how many properties are at and above that $625,500 amount.  The total number of homes in the aforementioned cities that are active right now and for sale exceeding the new FHA Loan Amount is 136(inquiry amount to 5M)

Subtracting the two figures from one another – 1338 total active residential listings minus 136 total listings over the new FHA lending guidelines equals – 1202 total listings that are within the new FHA guidelines.  With this new “loan limit” I know we are going to see “marginal impact” with the borrowers in the higher amounts.  It has been our experience most borrowers in that range also have the ability to generate conventional type lending.

When I search for those properties that are priced between the “new” FHA loan amount to where the bar was set by FHA in the past, at $729,750, That leaves us 31 total active listings that would no longer able to be purchased with the New FHA Lending limit. That would have been able to be purchased before this change.

31 is not a “landslide” – unless you are that specific home seller in that price range and your only lookers were depending on that “old” FHA Lending Limit.

2.    Of those affected, what will the impact be?

31 Sellers that have their homes listed for sale between the new FHA Limit and the Old FHA Limit – They are going to have to either reduce their sales price to conform with the FHA limits or wait for that conventional buyer or a buyer that doesn’t mind paying for the jumbo rate.

The Buyers that were wanting to purchase between the new $625,500 and the $729,750 – They are going to need to check into a 5% conventional or 10% conventional lending product (they still exist).  Or step up to a 20% conventional loan.  They might also need to “reduce” their wants if FHA is the only way they are going to have the down payment at 3.5%. 

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