A compromise federal spending deal signed Friday by President Barack Obama should help the Charleston-area housing market continue to recover, real estate professionals said.
The legislation temporarily preserves the federal flood insurance program and restores higher mortgage limits for loans backed by the Federal Housing Administration. The housing provisions were part of a larger spending bill, opposed by most of South Carolina's delegation, that keeps the government running through Dec. 16.
In the tri-county area, FHA loan limits will return to the $335,000 cap set in 2008 as part of a stimulus bill. The loan limit had fallen back to $302,450 on Oct. 1 when the stimulus program expired, but will return to the higher amount for two more years.
Most homes in the area sell at prices well below the loan limit, but caps on FHA loan amounts can affect all price ranges, so higher limits are seen as a positive by the real estate industry.
"You're talking about putting at least $30,000 of purchasing power back in the hands of buyers," said Ryan Castle, government affairs director for the Charleston Trident Association of Realtors. "Mortgage availability has an impact on all segments of the market."
As of the end of September, 333 homes were listed for sale in the region at prices between $300,000 and $349,999. In the prior six months, 253 homes were sold in that price range.
"It might only affect a couple of hundred people, but anything that will help to get this inventory down" is good for the housing market and the broader economy, said Jim Reese, general manager at Carolina One Real Estate and Mortgage.
The FHA backs about a third of U.S. mortgages and has been playing a large role in mortgage financing during the downturn as private financing became harder to obtain. Associations representing real estate agents and home builders pushed for the higher loan limits.
Among South Carolina's congressional delegation, Republican Sen. Lindsey Graham and Democratic Rep. James Clyburn voted for the spending bill. Opponents of reinstating the higher loan limits did not want to see the federal government more involved in mortgage financing.
"Those who want to increase FHA limits argue that the action is needed to jump-start the housing market, but this approach has already failed," South Carolina Republican Sen. Jim DeMint wrote prior to the vote in a blog on redstate.com.
The impact of higher FHA loan limits could be more significant elsewhere.
In some areas with high real estate prices, the FHA limit will rise from $625,500 to $729,750.
While the higher loan limits would last for two years, the National Flood Insurance Program was temporarily extended only through Dec. 16. The housing industry has been pushing for a five-year extension of the program, which provides the flood insurance many homeowners are required by lenders to obtain.