The housing market woes just keep on coming.
Jumbo loan ceilings, which the federal government raised during the recession in hopes of boosting the ailing housing sector, are set to come tumbling down again Oct. 1.
That could have big implications for a high-cost housing market like Greater Boston, which has benefited over the past few years from the decision to boost the starting point for more expensive jumbo loans to $523,750.
That's hardly luxury real estate territory - in many upscale suburbs that would barely get you in the door.
But starting in October, we will be looking at a new, and significantly lower limit of $465,750, warns Greg McBride, a senior financial analyst at Bankrate.com.
"It doesn't help, that's for sure," McBride said of the impact on the housing market. "There are likely to be fewer qualified borrowers once those (lower) limits kick in."
Now you could easily blow past $465,750 here in Greater Boston and still be far from anything luxury - the median price in North Andover is $500,000, while in Marblehead it is $480,000, according to The Warren Group. Nice towns, but we are not talking Weston.
Middle class buyers suddenly forced into jumbo territory will be faced with not only higher interest rates, but also with downpayment requirements topping 30 percent, according to McBride.
In fact, the market will start to shift this summer in advance of the Oct. 1 deadline given that it takes a few months to close a loan.
"The reality is that borrowers are going to see the impact of the lower limits on loan quotes as soon as late July," McBride notes. "The loan has to be closed by Oct. 1."
So is there a silver lining here for buyers?
Possibly. It could give sellers an added incentive to keep their prices below the new and lower jumbo limit.
But for sellers, already grappling with anemic demand and tumbling prices, this is a bitter pill to swallow
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