FHA to the rescue

Big news in the housing market. FHA loan limits have been extended to $500,000 from the previously paltry sum of $362,790. Obviously, you could buy little in SoCal with $362,790 which meant that the recent housing boom was driven largely by private lenders. This cash infusion should help more marginally qualified borrowers qualify and into some of the more expensive homes. Regardless of whether this is a good idea, it certainly seems likely to result in a reduction in supply of homes. That should stop the free fall of prices and result in the normal escalation of prices over time. See here for the PE's report.