Most of the attention on the economic stimulus package signed into law by President Bush earlier this year centered on the personal tax rebates and business investment write-offs.
But a less publicized feature of the $168 billion program could also provide a boost for the Sacramento and Tahoe housing markets.
In his signing ceremony, the president described the stimulus package as a “booster shot” for the nation’s slowing economy. Only time will tell if it does the trick, but if the medicine turns out to be just what the doctor ordered, a key ingredient in this prescription will be the long-overdue increase in the conforming loan limits.
The new law raises the 2008 limit for loans that Freddie Mac and Fannie Mae can buy or guarantee to a maximum of $729,750 from $417,000, depending on the median sale price in a particular metro area.
Sacramento is likely to be less than the maximum, but higher than the current limits. The result will be lower interest rates for what used to be jumbo mortgages because loans backed by these federal agencies are considered a safer investment and therefore carry lower interest rates.
In addition, first-time buyers who qualify will be able to get loans insured by the Federal Housing Administration up to $729,750 from the previous maximum of $362,750, again depending on prices in a region. 
The FHA loans are particularly attractive to new buyers because they only require 3 percent down payments.
The higher conforming loan limits will have the greatest impact on more expensive housing markets like the Bay Area, but they will certainly help areas like Sacramento, where prices have climbed significantly over the past five years.
While industry observers argue about just how much of an effect the economic stimulus package will have on the market, there’s no doubt in my mind that it’s a big step in the right direction.
The National Association of Realtors projects that this package may result in as many as 500,000 refinanced loans and could help reduce foreclosures by as many as 210,000. Additionally, NAR projects it could lead to more than 300,000 home sales, thereby lowering existing inventory and strengthening home prices by 2-3 percent.
Conforming loans could save consumers a significant amount of money each month over a jumbo loan. Take, for example, a buyer with a $500,000 mortgage. If he or she were able to get a 30-year fixed-rate conforming loan, the rate would be about 5.5 percent today, resulting in $2,238 in mortgage payments. At the higher jumbo rate of about 7 percent, that same loan would cost nearly $500 more each month.
As welcome as the news out of Washington is for home buyers (and existing homeowners looking to refinance), there is a catch: The changes in the guidelines are for this year only. Unfortunately, there is no guarantee that Congress will extend the higher loan limits beyond December 31.
The deadline is one more reason consumers who have been holding off purchasing a home may want to rethink their decision.
The spate of negative news understandably is frightening some potential buyers away from the market. But it’s important for consumers to keep things in perspective so they can make the right choice.
-- Clearly, the nation’s housing market has slowed down, but the sky isn’t falling. The market is stronger in some areas and weaker in others — even in metropolitan areas like Sacramento. Prices have dipped in many areas over the past year, but that is after a sharp run-up in values in the preceding years.
-- It’s normal for the real estate market to go thorough occasional down cycles, just like every other sector of the economy. However, in California, those retreats typically last just a few years at most and tend to be shallower than other parts of the nation, according to figures from the California Association of Realtors.
-- There’s an old saying that you make your profits in real estate when you buy and not when you sell. Experienced real estate investors tend to look at times like this as an opportunity to find the best value they can, understanding that over the long term their investment will pay off.
-- There is more inventory available for potential buyers to choose from, and sellers in general are much more willing to negotiate on price and offer incentives they wouldn’t have a year or two ago.
-- Finally, no one knows for sure when the housing market will truly recover and prices begin climbing once again. Trying to time the housing market is about as easy as trying to time the stock market. We’ll only know for sure that prices were at their lowest point after they have rebounded.
For those planning to stay in their home for at least a few years, you may not find a better time to invest. The rare combination of low mortgage rates, more attractive jumbo loan rates, and a greater inventory of homes for sale make this a unique window of opportunity for buyers.
Bob Bronswick is president and chief operating officer of Coldwell Banker Residential Brokerage in Sacramento/Tahoe.