How Does Stimulus Bill Affect Boulder Real Estate Market?

The recently passed economic stimulus package may not be as much of a benefit to the Boulder real estate market as we had hoped.

Where we once hoped that FHA loan limits would increase by almost 125% and that Fannie Mae and Freddie Mac would up the thresholds similarly for conventional loans to keep buyers out of ‘jumbo’ territory; it didn’t work out that way.

The new maximum for an FHA loan in Boulder County is looking like it will be just a tad over $459,000 for single family detached homes. That’s a long way from the $700,000+ number we were looking for in Boulder according to some information from Nora Ziel.

The same trouble is coming up for ‘conforming’ loans. Conventional loans with Fannie Mae or Freddie Mac that stay under their thresholds are conforming and while this number has been at $417,000 for the Boulder real estate market, the new plan seems to indicate that this number will go up. Unfortunately the number may only go up about $40,000 or so.

To see how that affects us, take a look at my recent Boulder real estate market update. With the average prices of homes sold over $680,000 (January figures) we’re still way off the mark for this increase to have any real effect for current buyers for the most part.

The good news is, these changes will have a positive effect on some buyers. People that currently are unable to get loans due to a low credit score or the current maximum loan limits may now be able to take advantage of FHA loans.

Here’s why: the current FHA loan limit for Boulder County is $349,125. Ok so sure, there are some homes in Boulder County that can be found for under $350k; but not many! We’ve got a lot of people in homes right now in the $375k to $460k price range that bought with ARM’s. There are also a lot of buyers that haven’t been able to act because their FICO credit score isn’t high enough for a conventional loan (Fannie / Freddie) so their stuck with a sub-prime loan (non conforming) and we know how hard it is to get one of those right now (or even since last August).

When the FHA changes get implemented in about a month, there will be some great opportunities for many buyers that can’t get a conventional loan, certainly not a sub-prime loan but now could get into an FHA product if they’re buying in what amounts to the ‘entry-level’ price range for much of Boulder County of $350k to $450k.

But wait, the catch is that all these new rules only apply through 12/31/2008.

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