I’m beginning to have my doubts about the new economic stimulus package. On the surface it would seem that the new higher loan limits should help Bay Area families to afford to buy a house. But there’s so much more to it, that I’m beginning to wonder how much help it’s going to be.

On the one hand, yes, we’ll have conforming loans up to $730,000. Take the average $900,000 house in Pleasanton, put 10% down, and you’ll get a conforming 80% first mortgage and a reasonable 10% second to go behind it - something that’s not very easy to do at the present moment (pre-stimulus/post subprime-jumbo meltdown).

And I’m not saying that I don’t want my $300. Or is it $1200 because I’ve got kids? Or do I not qualify because I made more than $42,000 last year? But my kids would qualify? Oh forget it, the loan-limits thing is way less confusing.

But wait a second, those new jumbo-sized conforming loans are going to have their limitations. It looks like you’ll have your choice of 30 or 15-year fixed products, fully amortized of course. That means no interest-only payments, no adjustable rates.

Along with the higher loan amount will come a higher interest rates (risk and return are indeed correlated, no bill is going to change that). We’re already seeing that effect in the market, rates seemed to go up for no reason at all last week.

I heard this bill referred to as “Economic Cialis” - it may help us out for a period of time, but when it wears off we’re still left with the same underlying problem, be that a slowing economy, a correction in housing, or a full-blown recession.

It’s an interesting discussion, for a while. But I’m really unsure how it’s going to play out. If it works and gets the market moving, and they’re really going to cut-it-off on December 31st, I can only imagine what the last two months of the year are going to be like.

So is this the jumpstart that we need? Is it a band-aid? Does it get us throught the toughest part of the market? What do YOU think? Leave a comment, and keep the discussion going…

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This entry was posted on Monday, February 18th, 2008 at 7:06 pm and is filed under Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.