July 28 2011 - The demand for properties in the $650K-$750K space is now shrinking. We can expect softer prices ahead in Orange County, L.A., and the Bay Area. In San Diego, the impact extends down to $555K.
Why? Changes in the maximum loan limits for FHA and high balance conventional loans take effect in the weeks ahead. Filling the void are jumbo loans with higher rates (which require higher income to qualify) and higher down payments and reserves, which require substantially more assets.
For Los Angeles, Orange County, and the Bay Area the maximum loan limit for FHA and conventional (high-balance) lending is reduced to $625,500. For San Diego, it is $546,250.
Originally scheduled for Dec 31,2010, FHA loans need to fund by Sept 1, 2011 to allow time to insure by Oct 1, 2010. Conventional high balance loans must be originated before Sept 30, 2011.
Softer prices ahead in this part of the market spell opportunity for buyers who still qualify. Historically low interest rates remain in effect.