On Christmas Eve, in the middle of the day, chaos ensued at the Whole Foods Market on University Avenue in San Diego. Too many shoppers, with too many cars, were creating gridlock/ Despite the valet parking service as well as the traffic control officers hired for the day, it was the price of doing food shopping that day at that store. On New Years Eve, in the middle of the day, the REI store on Copley Drive drew so many buyers that the check out line stretched around the store and held steady under the kayak section  and into the shoe section. The estimated wait time to reach a cashier was 35 to 40 minutes. On New Years Day, the Hotel del Coronado was not serving meals to non-guests. “We are not accepting walk-ins,” announced the hostess at the 1500 Ocean restaurant, “Only guests of the hotel are being served.”  These are all signs of consumption by consumers with confidence. Of course, this bodes well for how we perceive the economy and thus how we spend our money. In real estate, inventory is low in most neighborhoods. Along with interest rates at the lowest they  have ever been, this points to an improved value for existing homeowners.  For starters, 2012 bodes well.

Beginning October 1, less than 2 months from now, high-cost are loan limits will be reduced significantly. In San Diego County, the ceiling for conforming loans above $417,000 is $697,500. This ceiling helps a considerable number of buyers afford homes with a 20% to 25% down payment. The likely decline will be to $542,000 from $697,500. Not set in stone, but that is the chatter from the mortgage brokers. The financial malaise that struck with the Great Recession in the Fall of 2008 was countered with lowering interest rates, which spurred home buying.

As with home buying, so goes the economy – a healthy housing market creates jobs & spending. The U.S. government is a strong ally in homeownership. However, with recent budget discussions front and center, and the “D” word (default) used as leverage, government must find ways to reduce spending. Reducing or eliminating the government sponsored enterprises (GSE) known as Fannie Mae and Freddie Mac, would allow the U.S. to reduce a significant amount of spending. But, at what cost to the economy? Maintaining the flow of mortgages, ensuring that affordable mortgages are available, and ensuring that a range of mortgage products is available are tantamount to preserving a stable money supply.

It’s complicated, the processes in place that make our economy flow. But simple, really, when you consider what severe reactions would occur if the supply of mortgages dried up and real estate values dropped precipitously. Our local market has sustained heavy losses the 6 years, as have markets nation wide. By reducing the conforming loan limit, literally thousands of local home buyers will be shut out of the market. Fewer buyers = fewer sales = further devaluation in homes.

I urge you to contact your Congressional representative and ask them to make permanent the current limits.