The new conforming loan guidelines are official, and high-cost areas like San Diego will get a kicker. Now loans originated in 2009 for San Diego County homes will be subject to a higher, $697,500 limit.
This is good news, but keep in mind that we are likely still looking at a three-tiered system. Vanilla conforming loans are still subject to the $417,000 ceiling. Tier two, those conforming loans above $417,000 and up to $697,500, will have a little different (more expensive) flavor. Any loan exceeding the new, higher limits will fall in jumbo land and be subject to different underwriting guidelines (and rates) yet.
We are hoping this breathes some new air into the higher-priced market, one we have seen seriously stalled over the past several months. Now, buyers of homes priced in the mid-$800,000s with 20% down can avoid the death grip of the jumbo loan.
As for higher priced properties, more money down will solve the problem, but that is usually a problem in itself. So, for the most part, we will have to wait for the move-up buyers to return to the market in earnest before we see recovery in this segment, and that will only happen when the overstocked clearance aisles of short-sale and foreclosure properties have been cleared.