The Broker's Record

One thing that really affects the price of real estate is the affordability of real estate. For example, if there was no such thing as a home loan – that is, if everyone had to pay in cash – what effect would that have on real estate prices? I’m not much of a soothsayer, but I reckon prices would drop, dramatically.

Thankfully, of course, we do have home loans. The residential mortgage market has an enormous effect on the price of real estate. While the housing market was already softening considerably in 2007, there was one event in particular which really threw it for a spin, the sub-prime mortgage crisis. So-called “sub-prime” borrowers suddenly had no access to credit, and prices for lower-end homes took an immediate nosedive as their affordability evaporated.

Of course, the reverse was true on the way up – ridiculously easy credit, liar loans, lax underwriting standards, and mortgage fraud – all of this played a part in the enormous run-up in prices that we in Santa Cruz enjoyed for most of the early years of this decade.

Wether you are a prospective home buyer or a home owner, the role of credit is very important to you – it strongly shapes your ability to buy a home, or the price for which you will be able to sell your home. That’s why this morning’s news about the 2009 loan limits is so important.

I received a nice e-mail this morning from one of the lenders I regularly work with, breaking it down for Santa Cruz and Monterey counties. The good news is, the conforming loan limits for 2009 will stay the same as in 2008:

For Santa Cruz County, the new “high-balance” limits are:

1 unit $625,500

2 units $800,775

3 units $967,950

4 units 1,202,925

For Monterey County, we weren’t as fortunate. Here are the new limits:

1 unit $483,000

2 units $618,300

3 units $747,400

4 units $928,850

I asked the lender if a house with a legal accessory dwelling unit (aka “granny unit”) that could be rented would count as a “2 unit” property. The answer is no, the property must apparently be zoned as a duplex in order to qualify for the two-unit loan limit. If you are interested in borrowing more than the limit, you’ll need to hurry – the current limits of $729,750 expire on 12/15/08.