Jumbo Conforming Limit Expiring 10/1/11

NEW -> Contingent Buyer Assistance Program
According to IrvineRenter, the lower limit did affect purchase loans:
http://www.irvinehousingblog.com/bl...rming-limit-causes-84-decline-in-loan-volume/
In Los Angeles and Orange Counties, the conforming loan limit dropped from $729,750 to $625,000 on October 1, 2011. Many market bulls claimed this would have no effect on sales. In November sales of houses with loans between $625,000 and $729,750 declined 84% as compared to last November. So much for having no impact.
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But SGIP's post seems to indicate otherwise.

Did it have an impact?
 
It clearly had an effect on sales volume in that segment, and that in turn dragged the median price down in high priced areas where these homes are located, but most of that decline in "price" was actually due to a sales mix shift to lower-priced units.  It could affect actual prices in the coming months if the sales volume stays this low.  Many people rushed to close before the loan limit expiration so all that demand was artificially pulled forward, leaving a vacuum in its wake.  It remains to be seen if demand will recover quickly now that FHA financing is available again.

I like his "many market bulls" nonsense.  Who are all these bulls he refers to?  No links to any of course.
 
Liar Loan said:
, but most of that decline in "price" was actually due to a sales mix shift to lower-priced units. 
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How can you know this isn't rather a lowering of the price of the target units? 

I'm guessing we will have to wait 6 months to look at the Case Shiller 75th percentile figures to know.
 
Honestly don't think the drop in limits had THAT big of an impact. Jumbo financing is relatively competitive. The real issue is a general slowdown in sales at this time of year and that's about it. The minimum down payment loans that were financed through FHA and the Agencies was barely around 10%. That kind of reduction in closed mortgages does not equal an 84% drop in sales. Some lenders were funding High Cost Area Jumbo Conforming loans the very day of the cutoff so the data isn't even in yet to tell if the lower limits had any impact.

What we are seeing is a lack of inventory. Sellers don't want people traipsing through their homes during the holidays, some have refinanced into a lower payment and see no reason to sell, and other sellers aren't going to re-list because their WTF prices have run into a wall called reality. Low inventory will not result in higher prices paid. Buyer's won't come out to purchase tired homes or overpriced schlock. We're likely in for a long lull in prices as what shadow inventory comes out will be the "new inventory" for purchase (IMHO)

Soylent Green Is People.
 
November sales are August and September contracts. Anyone who was in peril of losing out on the loan limit change would have found another way to close early on. An August contract would have been pushed to close September 30th which then makes it seem like a November shortage of closed escrows since they were drawn forward.

I've lost track of all of the gimmicks used to prop up the housing market. Wasn't November 2010 the last time the $8k FTHB credit was authorized? Was that goosing sales back in 2010?

 
Soylent Green Is People said:
The real issue is a general slowdown in sales at this time of year and that's about it.
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I respectfully disagree with this.  The 84% drop is from one year ago, which means seasonality doesn't explain it.

Last year in November, there were 365 transactions between $625-730k.  This year?  58.  This is for all of Orange County and LA!!  That's a heck of a big drop in sales, especially when you consider how slow the market was last year due to the expiration of tax credits. 

Total sales for all segments combined were UP 4% over last year, yet this one segment had an 84% drop.  The only explantion is the one I've put forward.  People rushed to qualify starting in the summer, pulling sales foward and robbing November of sales that would have normally occurred.

freedomcm said:
Liar Loan said:
, but most of that decline in "price" was actually due to a sales mix shift to lower-priced units. 
Click to expand...

How can you know this isn't rather a lowering of the price of the target units? 

I'm guessing we will have to wait 6 months to look at the Case Shiller 75th percentile figures to know.
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When you go from 365 to 58 sales in a higher-priced segment, it's mathematically going to affect the county median.  Orange County had an SFR median of 480,000 in September and that plummeted 6% in ONE MONTH to 452,000 in October.  The expiration of the higher conforming limits was October 1st.
 
Do you have any data regarding the down payment amounts and new construction impacts to those closing numbers? 365 to 58 is a freefall, but what if some of those were new phase closings for some of the Irvine developments? Builders try and cram as many closings into the last quarter as possible which can impact monthly closed sale numbers. That kind of data is a bit tough to extract depending on the resources you have.

If the average down payment for those transactions in November 2010 was over 15%, a standard conforming loan was in place then, as it is now.

$625,500 / $730,000 = 85.6 or 14.4% down.
$625,500 / .90 = $695,000 purchase price. 10% down is the minimum allowed for Jumbo Conforming (standard limits)

My guess is that the November 2010 down payments on average were greater than 14.6% which puts the purchases into the standard Jumbo Conforming limits. The small fraction of purchases with less money down than the average would not carry forward to November 2011.

This is a data question and I wish I had more of it to know whose theory is right.
 
Helpful stuff there.

So at least some of the YOY drop could be attributed then to the timing of phase closings rather than actual sales decline due to funding reduction. We might see a big push up in December for closed builder sales. Who knows?!?
 
Soylent Green Is People said:
Helpful stuff there.

So at least some of the YOY drop could be attributed then to the timing of phase closings rather than actual sales decline due to funding reduction. We might see a big push up in December for closed builder sales. Who knows?!?
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I thought all Irvine new homes were purchased with cash?  :)
 
Liar Loan said:
Soylent Green Is People said:
Helpful stuff there.

So at least some of the YOY drop could be attributed then to the timing of phase closings rather than actual sales decline due to funding reduction. We might see a big push up in December for closed builder sales. Who knows?!?
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I thought all Irvine new homes were purchased with cash?  :)
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Nope, only about 30-40%.  :P
 
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