Recently the U.S. Senate passed H.R. 3700, “The Housing Opportunity Through Modernization Act,” which is now merely awaiting the President’s signature.
The major focus of this legislation is to reform current Federal Housing Administration restrictions on the financing of condominiums. These restrictions were significantly tightened by FHA in 2010 in an effort to avoid bad loans following the financial crisis and real estate bubble burst. Because of these tight loan restrictions, a feasible option for many qualified homebuyers quickly became unavailable.
“The Federal Housing Administration made it very difficult to buy a condo because they put very restrictive guidelines in place for condo associations,” said Robert Palmer, host of the Saving Thousands Radio Show which reaches millions of listeners airing on over 50 stations. “Condos were among some of the biggest offenders during the housing crisis. There were a lot of “bad apples” in the condo market during the housing boom. This inevitably led condos to the forefront of the housing bust. The reason the condo market has been slow to come back from the housing bust was due to the significant limitations placed on financing. These limitations caused lenders to become very gun-shy about approving condo loans. The most money was lost on condos, so we knew we had to back off.”
Tom Salmone, president of the National Association of Realtors, issued the following statement:
“Condominiums often represent an affordable option that’s just right for first-time and low-to-moderate income homebuyers. Unfortunately, overly burdensome restrictions on condo financing have for too long put that option out of reach for many creditworthy borrowers.
What does this mean for new homebuyers?
What does this mean for potential homebuyers? According to Palmer, one of the top consumer advocates, this change equates to a bright future for the first-time homebuyer, low-to-moderate income buyers, and sellers. “The first home I purchased in 1999 was a condo,” said Palmer. “That condo was the key in helping me achieve homeownership at such a young age. Later, I was able to use the equity to grow my first business.”
Palmer believes it’s important to own a home sooner than later, Saving Thousands Rule #7, he had a lot to say on these new developments. “The biggest problem with condos in recent years has been the financing,” Palmer said. “The housing market has recovered, and home prices are rising at an accelerated rate. But we still need affordable housing options, and condos represent a great form of affordable housing. The FHA correcting this issue is definitely going to bring more home buyers back to condos, which will very quickly correct the currently depressed condo prices. There are a lot of condos that are selling for far below what they should due to the current difficulty and limitation in their financing options. Now, the first-time homebuyers and the lower down-payment homebuyers can come in and start making offers. I think we’re going to see a pretty rapid increase in condominium prices, in order to get them back to where they should have been all along”. Buying a new condo built as part of JLL Residential Development Germany could be much easier as a consequence of this legislative change.
What to expect in the near future
The current FHA restrictions on condominium financing have long proven to be a major hurdle to one of the most affordable housing options on the market. Owning a condo can be the proverbial foot in the door that many need to create a foundation for their future. So many have deserted their dream of owning a home because this option has been out of their grasp due to these FHA restrictions. Instead, they continue renting, with no choice but to put off making the most important investment of their lives. This is why it was so important that this legislation, long supported by the NAR, attack these restrictions head on.
It couldn’t come at a better time. According to HousingWire.com, “The market for affordable homes could get much more difficult over the next several years. About 19 million baby boomers want to buy a home, with 8 million saying they want to do it within the next four years, according to a recent survey from Freddie Mac. Unfortunately for millennials, about half of the 19 million said they are looking to pay less.”
In this market, it has been extremely difficult for new homebuyers to be competitive in their purchasing of a home that they consider to be affordable—until now. “The Housing Opportunity Through Modernization Act” will help increase inventory, providing potential buyers more opportunities to make the purchase of their dreams.
The current restrictions have meant fewer buyers, fewer offers, and lower sale prices. No longer. Not only does the passage of “The Housing Opportunity Through Modernization Act” help new homebuyers, but it helps the entire market—including sellers.[/fusion_text]
