A proliferation of "For Sale" signs indicates that even the formerly go-go housing market of the Wood River Valley has been affected by the tight restrictions on mortgages that now exist across the nation. But recent action by the federal government has made local mortgages cheaper and easier to get.
Following a successful appeal by the Sawtooth Board of Realtors, beginning May 12 the Federal Housing Administration's local conforming loan limit was increased by 71 percent to $729,750, the maximum amount allowed by the U.S. Department of Housing and Urban Development.
Conforming loans, which are sold by banks to Freddie Mac or Fannie Mae, have lower interest rates and easier qualification criteria than do "jumbo loans." Both institutions are government-chartered companies that buy mortgages to boost the flow of capital through the housing market. However, the government limits the size of the loans they can purchase.
"Not only will this make the real costs of borrowing less expensive and open the credit markets to more potential buyers, but the interest savings will go a long way toward offsetting increased daily expenses," stated Bob Crosby, the Sawtooth Board of Realtors' government affairs director, in a press release. "Hopefully this will help to create a more optimistic feeling within Blaine County ... and move homeowners with difficult mortgages on to a more stable financial footing."
As part of an economic stimulus package created earlier this year, the federal government raised the local conforming loan limit from $417,000 to $427,500. The loan limits are set on a county-by-county basis. However, the Sawtooth Board of Realtors believed this relatively small upward adjustment, based on 125 percent of the county's average home value, did not reflect true housing prices. Crosby said that because Idaho does not require property sales price disclosure, the figures used for calculating the new conforming loan limit were not accurate.
"Our median calculation was $615,470 for 2007 when the impact of closed sales, where the sales price was not disclosed, is taken into account," Crosby stated. "This amount was significantly in excess of the assessor's office's median price. Since over 40 percent of single-family home transactions in Blaine County did not report the sales price on closing in 2007, not using some estimate of this data wildly distorts the true statistics for the county. This is especially true since a disproportionate number of non-reported sales prices occur in the higher-priced segment of the market."
With the encouragement from a number of county businesses and citizens, the board appealed to HUD, ultimately leading to an increase of more than $300,000 over the previous limit.
The board stated that Blaine County is one of only two counties in the continental United States to receive upward adjustments.
For Blaine County residents, this adjustment means that, based on a 20 percent down payment, loans for houses worth up to $912,000 can be financed with conforming loans, as compared to houses of up to only $534,375 prior to the board's appeal. Anything over that limit is considered a "jumbo loan." Crosby stated that local lenders have said conforming loans carry an interest rate about 1 percent lower than jumbo loans.
While the new conforming loan limit is set to expire at the end of the year, it's possible that it could become a long-term change, according an article in the April issue of Fortune magazine. This could mean a significant impact on more than just homeowners.
"When borrowers realize they can access mortgage financing easier, faster and less expensively than the recently constrained credit markets allowed, there should be a positive ripple effect felt across all county businesses," Crosby said.
