First of all the increase in the conforming loan limit is NOT a done deal. It was specifically excluded from the Senate bill that passed (Stimulus package). The increase was to be limited in time as well. This had the potential of creating a bubble in the housing market unless made permanent. Imagine the limit goes up to $725K and then expires and drops back to $417K after a couple of years. Buyers would once again have to use a combination of both 1st and 2nd to avoid PMI etc. What would happen to prices? Tough call, we will see. With Govenor Schwartzenegger behind it, we may still see it for California on a permanent basis. (As we should!)
Interest rates hovering around 5% for a 30 year fixed will indeed help Buyers into homes and Sellers out of the homes they are trying to sell.
For Buyers, as I continue to say, now is the time to find THE home you really want and find the Sellers REAL price. The asking prices are generally no where near the real number the Seller will accept when pushed. If there REAL price is still more than you want to pay, MOVE ON! But at least get in the game and find out!
For Sellers, price your home correctly near your REAL price, be competitive and your home should sell in a reasonable amount of time. The best home in a given neighborhood with the best price will sell. It is like a law of physics! Be creative. Offer credits. Offer Interest rate buydowns. Offer closing costs. If you do this instead of simply lowering your price it will get Buyers attention! Get the Buyers engaged and in the Game!