FHA loan limits will drop form $400,000 to $287,500 on October 1st , for Clark County. This may be perceived as a big blow to what is already seemingly scarce financing supply for housing but if you drill down the numbers, it doesn’t appear that it would have a significant effect on the housing marking in Southern Nevada. Here is why:
According to my trusted partners at Chicago Title, in the past 12 months there have been 2,398 sales between the price range of $300,000 and $415,000. (This is the price range that is affected by FHA lowering the loan limits to $287,500). Of 2,398 sales, only 278 were purchased using FHA financing. Of the 278, it is quite possible that roughly 50% of these borrowers would have qualified for a conventional loan putting 5% down. This translates into roughly 10 sales per month out of an estimated 4,000 sales that would be affected by the lower loan limits, which represents 1/4 of a percent of the housing market. It is probably a good time to partner with a mortgage company that has the most aggressive conventional financing. PRMI offers 95% financing with as low as a 660 FICO score.
Financial Markets
My suggestion would be to not take a peek at your IRA or 401k statements…The Dow Jones dropped over 750 points for the week, down over 1,000 points for the past 2 weeks, essentially dropping 8%. A typical 401k account with $100,000 drops roughly $8,000 in value. The Dow ended Friday up 60 points because a better than expected jobs report was released. 154,000 new jobs were created for the month of July. May/June numbers were revised upwards with an additional 54,000 jobs (all in the private sector) than previously thought. Last, hourly earnings increased .4%, another good sign for the job market.
Now for the bad news, The S and P downgraded US bonds from AAA to AA, despite a deal that was struck to raise the debt ceiling to stave off defaulting on debt. This could result in a temporary double whammy, stock market sell off and bond market sell-off, which leads to higher mortgage rates in conjunction with loss of wealth.
Southern Nevada Real Estate and Economy
Not much in the way of local economic real estate data this week, but always a hot topic is the water levels at Lake Mead. According to the below article in the RJ, the Colorado River is on track for its 3rd wettest year in 50 years. The water level is expected to get its biggest boost in nearly 15 years.
