Most people don’t realize that on Oct. 1, we will see the maximum loan sizes for FHA loans reduced back to the original loan levels prior to the run-up in home prices. While this may seem insignificant, buyers and sellers would be best advised to follow this change carefully and plan accordingly.
For example, in Sarasota and Manatee the maximum loan size for FHA loans with just 3.5 percent down is $422,500. The new limits will go down to $285,200.
While many want to cast their vote for fiscal responsibility and praise this move, there are many others who understand that the housing market drives the economy and anything that prohibits getting the inventory sold will surely slow the recovery of housing.
Make no doubt about the position I am in. As a mortgage banker who relies on home sales to make a living, I do understand the economics of these changes and what it will do to existing homes for sale, especially in the $300,000 range.
This is the sector of our market that is being hurt most. Homes under this price range are being picked off by investors and those who can still afford the 3.55 percent down payment, while the remaining homes stand idly by waiting for a buyer. These were the 2003-06 homes that people flocked to.
But let’s not focus entirely on the new loan limits. They are only one of the many initiatives that threaten our recovery. The real issue is that while government stood haplessly by allowing the meltdown to occur and then rewarded those who created the 36-48 month disaster, they are again looking at ways to scale back the ability of buyers to come into the market.
Consider the many variables that are now beginning to create a barrier to home buying. The United States has allowed thousands upon thousands of jobs to go overseas.
The United States has allowed manufacturing to practically die.
The boomers from up north have watched their pensions be erased or shrink to nothing.
The housing disaster will produce more non-buyers than in any time, and further consider that the proposed home mortgage interest tax deduction is on the table as a loophole and eyed to be cut.
The lowering of the HUD (FHA) loan limits is but one of many changes headed our way and combined could spell disaster for an economy in dire need of a housing rebound.
There are no simple answers to our ailing economy, but watching how some became multi-billionaires and those same people want to now lobby for us to cut back the opportunities to the lower and middle classes somehow does not sit well in my camp.
My advice is to watch the politicians carefully as they will decide whether housing ever recovers.
Joe Adamaitis, a mortgage banker at Academy Mortgage Corp., can be reached at (941) 706-5695.