There has been plenty of criticism of Washington's stimulus plan, but one idea that has built a quick consensus is the proposal to increase the "conforming" loan limit for Fannie Mae and Freddie Mac from $417,000. to $625,000. Such a plan, when adopted (which is very likely) will be a boom for refinancing, save consumers a ton of money, and will make new purchases easier. The current difference in "conforming" and "jumbo" loan rates is about 1.15%. By increasing the limit by nearly 50%, millions of consumers will benefit with lower interest rates, and this increase will soften the impact of the mortgage meltdown. Such a move will lower borrowing costs by as much as 17% for those who now qualify for a conventional rate, who didn't prior to the plan.
For the New York real estate market, this week has been a week of many pleasant surprises. First a change in the 80/20 tax law for coops (I'll get into this over the weekend), then a 3/4 rate cut, and now a change in the cap for conforming loans. For a stable market (in an unstable nation), I'm starting to smell major stimulus. I think the developments of the past week are pretty dramatic, and very bullish for our market.
Market Not Crazy About Stimulus, But Like Raising Loan Limit (CNBC)
Mortgage Rates Lowest Since March 2004 (Yahoo)
Analysts Predict Wave Of Refinancing (Financial Times)
U.S. Mortgage Rates Tumble (CBS Marketwatch)