The government has also initiated a “Conforming Jumbo” loan limit increase to help stimulate the housing market. These mortgages will be purchased by FNMA/FHLMC for the remainder of the year and adds much liquidity to the higher end price range. The previous loan limit for FNMA/FHLMC was $417,000. That limit has now been temporarily increased to $708,750. This makes a significant portion of the high end market now readily financible. As a result, an incredible number of home buyers across the country can now secure a mortgage in excess of the previous conforming limits with a very aggressive interest rate on a 30 year fixed rate mortgage.

It appears that interest rates have bottomed out and are not on the rise. In the last two weeks of May, interest rates increased anywhere from .50% to 1.0%. A 1 point interest rate increase results in higher principal and interest payments, even if the price of the home has fallen 10%. In an uncertain market environment, rising rates can wipe out the benefit of falling prices.