Higher conforming loan limits could help clear the San Francisco Bay Area market of foggy conditions caused by a stubborn system of high-cost jumbo mortgages.

The Bay Area's home sales ended 2007 down more than 39 percent in December compared to a year ago, the 35th consecutive such decline. Prices dropped 5 percent for the December-to-December period, according to DataQuick Information Services.

Statewide, California's home sales were off more than 33 percent, according to the California Association of Realtors.

One of the reasons the high-cost San Francisco Bay Area's nine-county housing market is in freefall is because the median price of homes in the region is well above the conforming loan level.

The conforming loan level is the level at which Fannie Mae and Freddie Mac will buy mortgages from lenders to repackage them as securities which, in turn, investors buy.

Fannie and Freddie don't purchase larger mortgages because their size makes them riskier. To offset that risk, lenders charge higher mortgage interest rates -- as much as two percentage points higher.

The Bush Administration's plan to reignite the economy by putting tax rebates in the hands of hopefully spend thrifty consumers, also includes a provision to increase the conforming loan level. That could make it more affordable to buy a home in high-cost housing areas like the San Francisco Bay Area.

If passed, the legislation could boost the conforming level as high as $730,000, making more larger loans cheaper in the San Francisco Bay Area and other high cost areas.

Cheaper loans would give more buyers greater affordability opportunities to buy homes.

Stefan Walker, an Alain Pinel realty agent in Los Gatos, CA, says if the limits are raised it would be a real shot in the arm to the housing sector, especially for the local, entry-level market that is suffering most in California's Silicon Valley area.

Published: February 4, 2008

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.