D.C. area housing market feels the pinch from lower jumbo mortgage limits
This article was first published on Saturday, November 5, by the Washington Post.
By Katherine Reynolds Lewis
Srinivasan Soundararajan and Jennifer Nordin have been thinking about selling their Potomac townhouse and moving into a detached house for some time. With two small children, 1 and 3 years old, they are beginning to outgrow their three-bedroom house.
This past summer, the couple stayed out of the market because of Congress’s gridlock over the U.S. debt ceiling; they feared that a spike in interest rates could disrupt a pending house purchase. Once lawmakers agreed to raise the ceiling, they started looking at houses again.
Now that they’re close to making an offer on a property, a change in federal housing policy has hampered their plans.
On Oct. 1, Fannie Mae and Freddie Mac lowered the maximum size of so-called jumbo mortgages that they would back to $625,500. Before Oct. 1, Washington-area mortgages as big as $729,750 could be purchased by Fannie and Freddie and repackaged to sell to bond investors, or guaranteed by the Federal Housing Administration. The change was the result of a law Congress passed in 2008 to stimulate the housing market in the depths of the crisis.
As a result, the upper end of the Washington real estate market is feeling the pain as buyers have fewer options to finance the purchase of a house. And sellers, like Soundararajan and Nordin, feel the change constrains the pool of potential buyers for their townhouse, which they expect to list at $725,000.
“It would definitely affect the ability of someone to buy our house,” said Soundararajan, a 43-year-old attorney, noting that his sale price equals the new cap plus a down payment of $100,000. “That’s not a first-time buyer. We’re going to lose that market.”
Protect your home (and finances) from disaster
This article was originally published in the August 2011 issue of Money Magazine.
By Katherine Reynolds Lewis
(MONEY Magazine) -- The season for natural disasters, it seems, is now year-round. Floods and a record number of tornadoes have already caused billions of dollars of property damage across the nation in 2011. Come fall, forecasters expect an unusually active hurricane season. Moreover, experts believe crazy weather is here to stay.
"Climate change is intensifying the extremes of rain and snow as well as drought," says Robert Henson of the University Corporation for Atmospheric Research.
Think homeowners insurance will cover your tab if your property is walloped by Mother Nature? Think again.
A 2008 study found almost two-thirds of homes were under-insured for disasters. Worse, about a third of homeowners have recently lowered their home or auto coverage to save money, according to a 2011 survey by the Insurance Information Institute. Finally, even if your insurance is adequate it may not have the right coverage for the risks you face. Below, key steps to limit the damage.
Shore up your property
For earthquakes. The roof is a key vulnerability. You'll spend 2% to 3% of your home's value to firmly strap down the roof to the walls and foundation, says Timothy Reinhold, senior vice president of research for the Institute for Business and Home Safety.
For tornadoes. Again, your roof is at greatest risk of being damaged by high winds, says Robert Schneller, a risk-management expert at the University of Houston. Spend $50 to $100 per hour to have a roofer secure loose shingles or flashing that a gust of wind could pull loose. Also install roof clips to better attach your roof to the walls ($1 per clip, plus labor).
The garage door is another weak spot. An impact-rated pressurized door will run you $1,300, but you can also retrofit your existing door with pressurized equipment, which will cost just $450 and provide reasonable protection, says Reinhold.
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