The value on these conforming loans in high-value areas was increased as part of the 2008 Economic Stimulus package to the lesser of either $729,750 or 125% of median home value within a given MSA (metropolitan statistical area). Here in San Francisco, our “jumbo-conforming” loan limit was $729,750.
On October 1, 2011 – pending any legislative miracle – the amounts fall back to what they were before the one-time boost, which for San Francisco means we will fall back to a conforming loan amount of $625,500. This is still well above the conforming loan limit amount of $417,000 for most of the rest of America.
The NY Times article uses a nearby area (Monterey, CA) that is a mix of inexpensive rural farmland juxtaposed against high-value coastal resort communities. So the expensive coastal areas in Monterey will be disproportionately impacted because their MSA includes an area with a lot of inexpensive real estate. Curious about how this change will play out in San Francisco, I turned to the San Francisco county tax records.
I pulled data from the county tax records for all of the recorded sales between January 1, 2010 and the end of March, 2011 (the most current data I could access with both sales and mortgage amounts). There were 1,964 properties with both the sales price and mortgage amount available in the public record. While this is far from the total of what was reported since the beginning of 2010, I think it is a large enough data set to still provide valuable insight.
Mortgage Loans Issued Since the Beginning of 2010
As you can see from the above chart, in the past 15 months, only 12% of loans made in San Francisco were between the regular (high value) conforming loan amount of $625,500 and the “jumbo” conforming loan value of $729,750. Put another way, 88% of the loans issued in San Francisco over the past 15 months could care less about the upcoming change to conforming high value loan limits.
Don’t get me wrong, I’m not thrilled with the end of the jumbo conforming loan, and certainly don’t think that its demise will help with the real estate recovery. That said, I also think it is important to not panic simply because a loan product that was in use by about 10% of the market will be going away. And I really don’t think anyone is “out to get” those of us who can afford to own a home in San Francisco.
