Today the FHFA announced that they have raised the Fannie/Freddie mortgage limit to $726,525 in high-cost areas:Link to Article
With deductible mortgage interest now capped at $750,000 by the I.R.S., buyers who are concerned about write-offs will want to keep their new loan balance in the $700,000s.
The strict equation is $750,000/80% = $937,500.
If buyers find a house priced higher, they could come up with more cash to make up the difference, or they could get a jumbo loan at roughly the same interest rate and live with the non-deductible interest paid on the loan amount above $750,000.
It makes the ideal purchase price in the $1,000,000-$1,100,000 range.
If the tax reform is a big concern for buyers as some have suggested, the homes priced in the $1,100,000 – $1,500,000 might feel it. Buyers above that range weren’t expecting as much benefit anyway, and probably won’t be as impacted – but theoretically there are fewer buyers the higher we go.
Out of curiosity, let’s keep an eye on the NSDCC stats.
Today’s NSDCC Actives and Pendings:
$700,000-$1,100,000: 121/72 = 1.68
$1,100,000-$1,500,000: 157/75 = 2.09
$1,500,000-$2,500,000: 243/81 = 3.00
$2,500,000 and higher: 399/44 = 9.07
The market has been healthy up to $1,500,000 roughly, and like Rob Dawg said yesterday, potential buyers may not know the exact impact of the tax reform until they start on their 2018 tax returns in spring.
Let’s come back then and check for impact!