Will Economic Stimulus Package Help Boulder Real Estate?

Top lawmakers unveiled an economic stimulus package and vowed to bring a vote at “the earliest date.” Bush hailed the deal as a temporary set of incentives that will boost the economy. The package would give most tax filers refunds of $600 to $1,200. It also would boost caps on Fannie and Freddie conforming loans in high-cost areas.

— According to the Wall Street Journal as of about 5:50pm EST

It’s the last part of that I want you to pay attention to. The idea that the economic stimulus package being negotiated by House Democrats and the Treasury Department may boost caps on FHA loan limits is a really big deal for Boulder real estate. With an average local median price in the Boulder real estate market of almost $600,000 most buyers haven’t been able to take advantage of the ‘best’ rates even if they had as much as 20% down for their purchase.

Factor it this way, previously if a buyer wanted to buy an ‘averagely’ priced house in Boulder (let’s say for argument’s sake, $580,000; which is the median price for a single-family home in Boulder right now) they’d not be able to get an FHA loan (current loan limits in Boulder County are $349,125 for FHA) and due to the purchase price (I’m assuming 20% down on $580,000 which leaves the borrower with $464,000 to finance) this puts the buyer into a ‘Jumbo’ loan ( current loan thresholds for Jumbos are $417,000).

So, now, according to Nora Ziel at Cherry Creek Mortgage and her industry cooperative partners including Jed Marquis, the package the Feds are looking at is slated to increase Fannie Mae and Freddie Mac loan limits up to about $730,000 – $740,000 (the increase will be adjusted for local markets at 125% of local median home price).

Since this move includes FHA and Jumbo limits significantly higher, the move will most likely be a significant improvement in liquidity and pricing in the local Boulder real estate market.

Still uncertain is whether the other provisions of FHA reform will be included (such as lowering down payment requirements).

This represents an agreement in principle and must still go through the legislative process. Based on information from folks wiser than I am, my best guess is that this will happen sometime after the State of the Union next week, likely progressing into early February.

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