Stimulus Plan Helps Boulder Real Estate Market

The biggest winners will potentially be those already invested in the Boulder real estate market.

This comes from part of the new economic stimulus plan passed by congress this week and waiting President Bush’s signature. The part of the stimulus plan that should be interesting to Boulder real estate investors is the portion that increases loan limits on both FHA loans and Jumbo loans.

As I outlined earlier in a post on the proposed stimulus plan, the interest-rate gap between “jumbo” loans (loans above the $417,000 limit) and also, “conforming” loans below that limit, has been stubbornly high for a long while. Last week it was close to a full percentage point as compared to last July when the gab was about 0.2%.

Some critics of the Fannie Mae and Freddie Mac loan limits claim that the lower limits at $417,000 keep FHA guaranteed loans in the realm of “affordable” home prices. They claim that “affordable” refers to ‘working class’ homes and home prices.

Well, we all know that with the average price of homes well over $500,000 and really closer to $600,000, the benefit to those intending to buy or refinance loans at amounts in the Boulder real estate market is clear: lower cost (lower interest rates).

According to an AP story, some of you may have to wait though.

Still, the impact of the changes is likely to take several months to be felt in the mortgage market, said Doug Duncan, chief economist at the Mortgage Bankers Association. Investors are still working out whether loans above $417,000 will be packaged together as securities with loans below that level, or treated separately.

Also, Duncan said, investors will want to study default levels on loans above $417,000, and prices could reflect a higher level of risk until that is known. “Investors will have to see how those securities perform relative to others,” he said.

WISDOM TO LIVE BY:

Buffett On Reputation:

It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.

Warren Buffett investor

Comments

One Response to “Stimulus Plan Helps Boulder Real Estate Market”

  1. Stan Metcalf on February 16th, 2008 4:20 pm

    You really think that the feds will really do anything that will have an impact on us locally?

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