Homeowners whose houses are valued over $500,000 are faced with a difficult situation in the current real estate market. Loans over $417,000 fall in to the category of “jumbo loans.” Because they are bought and sold in smaller amounts than loans under $417,000, the interest rates tend to be higher on them. Interest rates on jumbo loans are much higher than for conventional loans. It’s not surprising, then, that the number of single family houses selling for more than $500,000 fell to 12.4 percent of house sales in December, down from 14.2 percent a year ago.
The most effective way to overcome this problem would be for Congress to raise the limit on conforming mortgages from the current $417,000 to $625,000, which would make affordable and safe financing available to buyers in high cost areas.