High Value Conforming Loan Limit to Fall, Hysteria Ensues

Author: Matt Fuller
Published: May 12, 2011 at 10:04 am

The folks at On the Block from the SF Chron lead with "Should we be punished for living in an expensive area?" Socketsite takes the factual approach with "Super Conforming Limits In San Francisco Set To Expire September 30." The New York Times picks perhaps the worst possible example to terrify us all that the real-estate-world-as-we-know-it ends September 30. What's the buzz about? Beginning October 1, the US government is decreasing the size of mortgages that they will insure. Mortgages that conform to these government guidelines are known as conforming loans.

As part of the 2008 Economic Stimulus package, the value on these conforming loans in high-value areas was increased to the lesser of either $729,750 or 125% of median home value within a given MSA (metropolitan statistical area). For San Francisco, our "jumbo-conforming" loan limit was $729,750.

On October 1, pending any federal legislative miracle, the amounts fall back to what they were before the one-time boost, which for San Francisco means we will fall back to a conforming loan amount of $625,500, which is still well above the conforming loan limit amount of $417,000 for most of the rest of America.

The Times article used a nearby area (Monterey, CA) that is a mix of inexpensive rural farmland juxtaposed against high-value coastal resort communities. So the expensive coastal areas in Monterey will be disproportionately impacted because their MSA includes an area with a lot of inexpensive real estate. Curious about how this change will play out in San Francisco, I turned to the San Francisco county tax records.

I pulled data for all of the recorded sales between January 1, 2010 and the end of March, 2011 (the most current data I could access with both sales and mortgage amounts). There were 1,964 properties with both the sales price and mortgage amount available in the public record. While it isn't the entirety of what sold since the beginning of 2010, I think it is a large enough data set to still provide valuable insight. 

Continued on the next page

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Article Author: Matt Fuller

Matt spends most of his waking hours obsessing over all things San Francisco real estate. He is 1/2 of the successful JacksonFuller real estate team, and has spent the past nine years working with buyers, sellers, and investors of San Francisco real estate. …

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