Economic Metamusel for election year

Will the financial markets return to normal any time soon?  Remember when we said that it couldn’t be all that bad if the government wasn’t involved.  Well, that changed and they’re definitely involved now…holding a great big spoon.

The overall stimulus package includes temporary support for raising the conforming loan limit for Fannie Mae and Freddie Mac programs beyond the current $417,000 to $625,000 for higher cost areas such as the San Francisco Bay Area.  Also the Federal Housing Administration (FHA) would be able to insure loans up to $725,000 from the current $362,000 ceiling.

According to a article today…”‘Because the country needs this boost to the economy now, I urge the House and the Senate to enact this economic growth agreement into law as soon as possible,’ Bush said.”

I expect this could have an affect on the local real estate market in 2008 since these dramatic actions are designed to stimulate the economy back into action.  Many borrowers here rely on jumbo loans, where the median price for a single family home was $936,000 for San Mateo County in 2007.  However, I’m really not sure if it’s a well-designed plan (hmmm, I can’t believe I even wrote that) or a knee-jerk reaction fueled by political pressures.  Something needs to happen, but is reducing the Fed Funds rate by another 0.75 percentage point and increasing the conforming loan limit at the same time a good thing in the long run?  Why do I keep thinking back to 2001?

This development has caught the attention of two other local Realtors, who also share their take on this emerging topic:

  1. Arn Cenedella, a Realtor with Coldwell Banker in Menlo Park highlights how much can be saved each month for a typical borrower.
  2. Dave Blockhus, a Realtor with Coldwell Banker in Los Altos points to the the fact that the down-payment will still be an issue for many.