Tuesday's election brought a lot of housing news for California, and the question I'm hearing most from buyers and agents is about Prop 37. Here's what passed, what it actually does, and what it changes for buyers right now (short answer: not much yet).
What Prop 37 does
Prop 37, the Middle Class Homeownership and Family Home Construction Act, passed with about 61% of the vote, according to AP results reported by KQED (the count was still going as of Nov. 4). It authorizes up to $25 billion in revenue bonds for a state second-mortgage program run by the California Housing Finance Agency (CalHFA). Here's how it's set up, based on CalMatters' explainer:
A state second loan of up to 17% of the price. The buyer puts down at least 3%, and a regular first mortgage covers the rest.
New homes only. The home must be newly built or newly converted to housing, and the buyer has to be its first occupant. Resales don't qualify.
Income and residency limits. Household income under 200% of the county's median, at least one year as a California resident, and the buyer must live in the home.
Price caps. Roughly $1 million inland and up to about $1.5 million in high-cost areas like Orange County, adjusted each year.
Bond investors carry the risk. Buyers repay the second loan over time, and under the measure's text, private bondholders rather than taxpayers absorb losses from defaults.
What isn't decided yet
The interest rate and term on the second loan haven't been set, and neither has a launch date. Those depend on how CalHFA builds the program and what bond investors are willing to accept, which the state's Legislative Analyst's Office called a major unknown. Keep in mind it's a second loan with its own monthly payment, so it lowers the cash you need to close, not the total you're borrowing. If you're shopping now, plan with the programs that exist today and treat Prop 37 as a possible option later.
The rest of the ballot and the midterms
A few other results matter for housing. As of the latest counts reported by CalMatters, Prop 1 passed, borrowing about $11.25 billion mostly for housing construction and renovation, including $1.25 billion for the state's veterans home loan program. Prop 45, which would have scaled back CEQA environmental review to speed up building, was failing.
Xavier Becerra won the governor's race. HousingWire reports he has said he plans to declare a housing-shortage emergency on his first day and to expand state mortgage and down payment help. Nationally, control of Congress is changing hands in January, and housing bills on supply, Fannie Mae and Freddie Mac, and credit scoring are already being discussed. Any federal change still has to go through the legislative process, so your loan options today are the same as they were last week.
For agents
Expect Prop 37 questions from buyers, and be careful not to promise it. It can't be used on resale listings, and nobody knows the terms or the start date yet. If you work with new-construction communities priced under the cap, keep an eye on CalHFA for program details as they're released. For veteran buyers, the Prop 1 veterans home loan funding is worth noting too. For today's offers, nothing changes: a fully documented pre-approval and a clear financing plan still win deals.
Plan with what's available now
If you're thinking about buying, I'll walk you through the options available today and keep you posted as Prop 37 details come out. I'm licensed in California, Arizona, Washington and Oregon. Start your purchase plan here, or call or text (949) 910-3943.
Mack Davidson, NMLS #1006831, E Mortgage Capital. Your rate and terms depend on credit, property and loan program. Equal Housing Lender.
