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Conforming Loan Cap: Unrealistic for Manhattan

This week the stock market has had huge swings. The federal reserve lowered interest rates and politicians in Washington are trying to come up with an economic "stimulus package" or as some call it a "bail-out" for banks.

As I've written before for various reasons Manhattan has not experienced the housing crisis like the rest of the country.

One part of the "package" that will help buyers in Manhattan is to raise the conforming loan limits for Fannie Mae and Freddie Mac, beyond the current $417,000, which would allow the government-sponsored companies to buy bigger loans in areas with high housing costs. The new limit which may be only temporary would be 125% of a metropolitan area's median housing price, up to a cap of about $730,000.

The median sale price for a Manhattan apartment in 4-Q-07 was $850,000. according to Miller Samuel. The median price was up 6.4% from $799,000 in 4Q-06 but down 1.7% from the previous quarter of $864,397.

Of course Manhattan is only a part of the metropolitan area, but the whole New York metropolitan area is also one of the most expensive places to live in the US.

At 125% of Manhattan's median we are way above the $730,000 cap. Raising the conforming loan limit from $417,000 to $730,000 will still help many Manhattan buyers as will lower interest rates. Currently loans above $417,000 are called "jumbo loans" at a higher rate.

Aside from irresponsible financial decisions, bad loan products and foreclosures that have plagued most of the country's housing markets, many of the REALTORS® that I talk with throughout the country say there is a big gap between incomes and property prices. The buyers can't afford the home prices in their markets. Buyers won't buy until prices come down.

In Manhattan buyers are buying. While home prices might seem high in Manhattan, Manhattan salaries are the highest in the country according to a national salary survey from the bureau of labor statistics reported in The NY Post.

Equivalent to nearly $147,000 per year, average weekly pay for Manhattan residents of $2,821 is up 16.7 percent from the same period of 2006, maintaining its spot as the wealthiest county in the United States.

Nationally, the average rise was 5.1 percent to $885 per week, or $46,000 per year, the U.S. Bureau of Labor Statistics reported.

After Manhattan, the country's top-ranked counties in the first quarter were Fairfield, Connecticut, a New York City suburb, at $1,979, followed by Suffolk, Massachusetts, which includes Boston, at $1,659, and San Francisco at $1,639.

Four of the 10 counties with the highest average wages were in the New York area, while three others were in and around San Francisco, near the Silicon Valley high-technology corridor.

Among the 50 states and the District of Columbia, the capital Washington ranked first at $1,428 per week, followed by New York state at $1,397, Connecticut at $1,263, Massachusetts at $1,110 and New Jersey at $1,097.

In terms of increase in wages, Manhattan is the fastest-growing county in the nation according to the bureau of labor statistics.

Since Manhattan residents pay more income taxes to the federal government than any other county in the country and more than 3x the national average it's about time we get government backed loans in tandem with our cost of housing.

Regardless of economic conditions the conforming loan cap needs to be increased in Manhattan and other expensive markets. Manhattan is definitely not Crawford Texas.


  1. Mitch,
    All of us who live and work in higher priced markets are hoping to see a higher conforming loan limit.

    It has been downright silly of the boys in DC to ignore so many major markets in CA and the East Coast.

  2. Hi Kaye, Thanks for stopping by. The higher limits should help buyers in our markets. IMHO the reason the high priced markets have been ignored is because they are all in blue states.


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