The US government recently began to pullback the assistance it has been providing to the mortgage market to see if private lenders can pick up the slack, reports The Wall Street Journal.
Critics are concerned the move will cause more issues in regions where housing demand has not yet recovered amid the slow economy.
One recent move reduced the loan limits Congress expanded in 2008, allowing Fannie Mae, Freddie Mac and the Federal Housing Administration to buy mortgages up to $729,750. The FHA has financed nearly half of all home purchases since the market crash of 2008 and allowed buyers to make minimal down payments - many as low as 3.5 percent.
"The net-net here is that the available pool of credit for housing is shrinking. Prices will have to decline," Christopher Whalen, co-founder of Institutional Risk Analytics, told the WSJ.
Some say home sellers are in for a suprise when there find much fewer potential buyers able to qualify after the government's retreat. The changes may deter "trade-up" buyers who would typically use home equity, which declined after 2008, as a down payment to finance the purchase of Houston real estate.
Courtesy of 2M Realty News