We will a drop in to the $500,000 range according the information I received.
Please don't discount the power of the National Association of Realtors though. We just sent out a call to action yesterday to all 1,000,000 members to write to their legislators to keep the present limits. I think we have a good chance of success.
As far as brokers doing BPO's on Maui, I doubt they will take this in to consideration. The recent passage of Act 48 in Hawaii, has brought foreclosures to a standstill until the regulators can figure it out. I have not done a BPO in 2 months and I was doing 3 a week . If I purchased in 2009/10, I would not even bother to apply unless you put down about 50% down payment, values have dropped too much and you may not have as much equity as you think.
Tracy Stice, Broker in Charge Maui
Hawaii Life Real Estate Brokers
The problem as I see it is multifaceted. Poor regulation is certainly one reason, rating agencies another. This goes right back to Mr Greenspan and the Dot.com bubble, with economic idealism playing its part. But where I think the real hub of the problem lies, is in the financial markets; derivatives, securitized mortgages, CDO's, and CDS's. Conveyor belt lending that repackaged risk for export, the unrelenting greed that followed, and the tsunami that many saw coming, but were either to fearful to point out, or in too deep to pull out. Wall Street's involvement was a dance with the devil!
Perhaps Lawrence Yuen, the NAR chief economist could answer your question better than I could about making mortgages more expensive. My guess is that these loans would now be treated as Jumbo loans and have the corresponding added points or slightly higher rates, in any case your thought about driving the market prices down even further will be true in my opinion.
We have all kinds of cash buyers snapping up bargains, especially from Canada right now. My company has already closed 5 deals over $1,000,000 this year to cash Canadian buyers.
Unfortunately , government meddling started this whole fiasco by deregulating the entire lending industry, now they are trying to patch it with bandaids.
The best thing for this market it to let it takes its course. Everyone will be much better off when a full correction has taken place. Efforts to prop it up are more likely to prolong the pain. Remember, this isn't lowering the conforming loan limits. It's only a reversion, removing one of the life supports that was introduced a while back when the credit squeeze started.
BTW, in other states, private investors have been very active in the market, and comprise a large portion of buyers for distressed sales.
To answer your question, attached is the text from our NAR call to action of a few days ago. It clearly states the NAR position:
Dear Representative Hirono,
As your constituent, and a REALTORÂ®, I urge you to act now to make the current loan limits for FHA, Freddie Mac and Fannie Mae (the government sponsored enterprises, or GSEs) permanent. On October 1, 2011, the mortgage loan limits for FHA and the GSEs will decrease, lessening the availability of mortgage credit for hundreds of thousands of responsible and credit-worthy American families. What we need now is time for the real estate market and overall economy to heal, to self-correct, and stabilize. Reducing mortgage liquidity at this time will hurt our fragile economic recovery. H.R. 1754 has been introduced in the House by Reps. Miller (R-CA) and Sherman (D-CA) to make the current limits permanent. No similar bill has yet been introduced in the Senate.
In today's real estate market, lowering the loan limits will make mortgages more expensive for households nationwide. Private investors have not yet returned to housing markets, and FHA and GSE mortgages together continue to constitute the vast majority of home financing available today, which makes it particularly critical to extend the current limits. Lowering the loan limits now will leave credit-worthy borrowers without access to affordable financing and will prolong our housing crisis.
Although many believe that lower rates will only affect a few high-cost markets. the new limits, published by HUD and the Federal Housing Finance Agency (FHFA), show that more than 669 counties in 42 states and the territories would be negatively impacted by the loan limit change. The average decline in loan limits would be more than $68,000. Only eight states will see no decline. Every other state will see a drop in loan limits, and therefore a corresponding drop in the availability and affordability of mortgage credit. I urge you to pass legislation, like H.R. 1754 in the House, to make the current limits for FHA and the GSEs permanent, and preserve housing opportunities for American families.
470 Ulumalu Rd
Haiku HI 96708-5316
Take a look at the link in my reply. That will give you an idea of the law change. I am writing a new blog to explain further and may some predictions as to what the moratorium on non judicial foreclosures will do to the Hawaii market.
I'm not a loan officer, but given the steep drop in prices, I would think it wouldn't have any affect.
In the first quarter of 2011, the median price was $450,000. With the change in the loan limit, that still gives a buyer more than an additional 35% to work with. It doesn't look like the market has hit bottom yet, so I don't think it will affect condos at all. If it has any effect, it will be for a limited number of sales in Kula, Wailea, Kapalua and Kaanapali.