If you are a real estate investor and your strategy is high-end homes, you may want to pay closer attention to the “Housing Bailout Bill” that just got passed through the Senate today. This bill is the government’s knee-jerk reaction to the so-called housing-crisis that is on-going here in US. In essence, the government is wanting to allow entities like Fannie Mae and Freddie Mac to purchase more distressed homes at lower interest rates. This will have a two-fold effect.
1 – Government involvement will skew supply curves and distort real home price values.
2 – Government involvement will cause the majority of loans serviced by private banks to somewhat move to entities like Fannie Mae and Freddie Mac.
But, there is some peculiar in there…
The conforming loan limit is being lowered from $729,000, initially, to $625,000 to $550,000. So, for all of you “rich” investors out there, you will not be able to use GSE’s (Government Supported Entities) to finance high-end homes.
In states like California, where the median home price is well over $500,000, this could prove to be a big problem. Yet again the government screws up more than they “fix”.