HUD has rolled out their new FHA loan maximums. It’s not as high as we had hoped, but the increases will help us out. Locally, we saw an increase of roughly $80k for single family residences. The new limits for the Austin/RR MSA are as follows:

Single Family = $288,750
Duplex = $369,650
Triplex = $446,800
Fourplex = $555,300

You can run find the limits nationwide here.

The conforming loan limit increase included in the recently passed economic stimulus package unfortunately doesn’t mean any change for Austin. The conforming loan limit can increase to as much as $729k for some counties, but the loan limit can only increase to 125% of a county’s median priced home. Travis County, with a median price of under $200k, won’t benefit from any increase. A county must have a median price of at least $333k + in order to see any increase.

Bank of America announced this morning that they plan to purchase Countrywide for $4b in the third quarter of 2008.  It will be a stock buyout.  It’s highly speculated as to why BOA would choose to take on the troubled mortgage corporation.  Some speculate they are doing so for the loan servicing software, and some speculate they are doing so to “save face” after their $2b bail out of the company earlier this year.  Bank of America has announced plans to shut down Countrywide’s failing sub-prime department.

Last Friday, the Senate passed an “FHA Modernization” bill in a landslide 93 to 1 vote.  If the president signs it in, it will increase the loan amounts that FHA can insure, and will cut down the minimum 3% down payment to 1.5%.  It will also require more counseling to those getting FHA loans.

In my opinion, if the bill is signed in, it will apply necessary pressure to conventional lenders to introduce competing products.  This would mean a much needed loosening of lending standards.

I typed this to an investor client today, and thought it would be good to go ahead & post it here as a “quick & dirty market update.”

The market here has somewhat stagnated. Properties are still moving, but they’re taking longer than previously. Prices aren’t going down, but we’re not seeing the rapid appreciation we saw last year. This spring will be telling to see what kind of appreciation we’ll see until 2009. The California market has affected us because not as many Californians can sell their homes, so we’ve seen a slight decrease in migration. The mortgage market has had the biggest effect on our market - it took ~25% of the buyers out of the market. Everything I’ve read indicates that the mortgage market will have worked itself out by the first of 2009, so I expect our market to be gunning full bore ahead at that time.

I honestly believe that this is the best time to buy real estate in Austin for the foreseeable future. We’re able to come in ~5-10% below asking and be taken seriously. I’m seeing my clients successfully negotiate the prices to ~95% of asking price.

Let me preface this by saying that we (Austin) are in one of the best real estate markets in the United States. People are still buying & homes are still selling - but DOM (days on market) is a little longer. The only market to remain relatively untouched by the mortgage fallout is the super-high end market ($3m+). Unfortunately, that’s not my market (at least not this year.) With that said - we have been affected. The mortgage fallout seemed to coincide w/ the seasonal slow-down this year, so it just seems like it’s a much slower holiday season.

I’ve said all along that we should see some relief by around February/March…it won’t get back to the crazy days of “anyone can buy a house,” but the pendulum will start swinging back in the right direction.

So…the point of this blog…I received a forwarded email from an LO that was extremely encouraging. A representative from her bank met w/ the director of FHA, who was extremely optimistic about raising the cap of FHA loans to $417k by the end of December.

This is huge. There are many people who are completely unqualifiable (even in sub-prime) or who are sub-prime (and would receive a hideous rate) who can qualify for FHA. The only hitch is that they just removed DPA’s, but we can still get an FHA in with 2.25% down, and no closing costs. Let me say this: If you can’t come up w/ 2.25% then you have no business buying a $400k home!!!

Let’s just say that I will definitely begin actively marketing FHA loans as soon as the cap is listed (and I’ll go ahead and start preparing now!)