FHA Updates Condo Rules

FHA updates condo rules that should boost financing options on condos

Long-awaited updates to Federal Housing Administration condo rules will take effect October 15, 2019 under revised guidelines issued last month. Housing officials praised the change, saying the FHA loan program will now be more “flexible and responsive to market conditions.”

FHA said it is bringing back spot approvals and taking other steps to loosen requirements for FHA-insured condominium financing. The move is expected to allow more buyers to obtain low downpayment mortgages on affordable housing options.

An estimated 20,000 to 60,000 more condo units per year are expected to qualify for financing, according to the FHA. That represents a substantial increase from current provisions, with only 6.5% of the more than 150,000 condo projects approved for FHA financing.

Once implemented, the guidelines will mean an individual condo unit in a building of 10 units or more may be eligible for spot approval if no more than 10% of the units are FHA-insured. In smaller buildings, with fewer than 10 units, no more than two units can be FHA-insured.

The new rules will also:

  • Extend FHA certifications on condo developments from two years to three years, reducing the compliance burden on condo boards.
  • Insure more mixed-use projects so approved projects can now have up to 35% of their square footage dedicated to commercial or other non-residential uses.
  • Loosen restrictions on owner-occupancy rules, allowing projects to be just 50% owner-occupied.
  • Allow for single-unit mortgage approvals-often known as spot approvals-which will enable FHA insurance of individual condo units, even if the property does not have FHA approval.
  • Secure additional flexibility in the ratio of investors to owner-occupants allowed for FHA financing in a condo building.

NAR President John Smaby applauded the ruling, saying it culminates years of collaboration between NAR and the Department of Housing and Urban Development (HUD). He expects the ruling will help reverse recent declines in condo sales.

“Condominiums are often the most affordable option for first-time home buyers, small families, and those in urban areas,” Smaby noted.

FHA Commissioner Brian Montgomery said the agency has been working alongside stakeholders for three years to update its condo policies. NAR has sought rules changes since 2008, specifically to allow the owner-occupancy level to be determined on a case-by-case basis, and to extend the approval period for project certification to five years.

“It had become clear for many years that we needed to update our condo project approval regulations so that, while not exposing the agency to more risk, they are more flexible and less prescriptive and more reflective of the current market than the previous condominium project approval provisions,” Montgomery said on a call with reporters and the HUD secretary.

“This new rule allows FHA to meet its core mission to support eligible borrowers who are ready for homeownership and are most likely to enter the market with the purchase of a condominium,” added Montgomery, who is also HUD Acting Deputy Secretary.

In a press release announcing the updates, HUD stated, “In an effort to promote affordable and sustainable homeownership, especially among credit-worthy first-time buyers, the Federal Housing Administration (FHA) today published a long-awaited final regulation, and policy implementation guidance, which establish a new condominium approval process.”

Source: NW REporter 9/9/19

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Buyers Give Fireplaces the Cold Shoulder

Fewer new homes are being built with a fireplace, a sign the cold-weather amenity is falling out of favor with home buyers. A record low percentage of newly constructed single-family homes—41%—last year included a fireplace, according to an analysis of U.S. Census Bureau data from the National Association of Home Builders. The share of single-family homes with fireplaces has been declining since 2015, the NAHB reports.

“An obvious explanation for the declining trend is that builders are foregoing fireplaces in some of their homes so they can bring them in at prices their customers can afford,” the NAHB reports on its Eye on Housing blog. “Keeping new homes affordable has become a considerable challenge lately.”

Fireplaces are usually considered a desirable amenity but not a must-have, the NAHB notes. Fifty-five percent of buyers rate gas-burning fireplaces as desirable, while 48% say the same of wood-burning fireplaces as desirable, according to the survey. That places such features in the middle of the list of decorative features most sought-after in terms of desirability, according to the NAHB’s “What Home Buyers Really Want” survey. However, only 16% of buyers say either type of fireplace is essential in a home purchase.

Fireplaces are the most uncommon home feature in the lower price points of the market. For example, just 7% of new single-family homes started in 2018 that were priced under $150,000 had fireplaces. On the other hand, more than 60% of homes priced at $500,000 or above had a fireplace.

Source: “Share of New Homes With Fireplaces Drop to Record Low,” National Association of Home Builders’ Eye on Housing blog (9/16/19)

6 Lessons Monopoly Can Teach About Home Buying

  1. Patience

MONOPOLY: So your family has decided to play Monopoly? Refill your beverage, grab a snack and change into comfortable clothes. You’re going to be there a while.

LESSON: Buying real estate is a process. There’s pre-approval for a loan, interviewing agents, searching for homes, submitting an offer, maybe submitting another offer, the home inspection, the appraisal, and final loan processing before you get the keys. Needless to say, buying a home can take some time. Instead of getting frustrated, focus on all of the great reasons you decided buying a home was right for you. Staying in close communication with your agent throughout the process will help, too.

  1. Neighborhood matters

MONOPOLY: Everyone starts the game with one corner in mind: Boardwalk and Park Place. The high-priced properties have the best returns on investments, and the players who snag them first tend to do well in the game.

LESSON: Location is often a major consideration in real life as well. Home values, your lifestyle and so much more are factors in your neighborhood choice. Work with your agent to learn all you can about the neighborhoods that pique your interest.

  1. Keep an open mind

MONOPOLY: Baltic and Mediterranean Avenue have a bad reputation because they’re the cheapest properties on the board, but they also present opportunity. Add a few houses and hotels and your return could be bigger than the one on nearby Connecticut Avenue.

LESSON: Keep an open mind when shopping for a home. An up-and-coming neighborhood may have appeal you didn’t see before, and more value for your budget.

  1. Be prepared

MONOPOLY: You’re a Monopoly mogul! You have a handful of desirable properties and a steady stream of income from your houses and hotels. Then comes the Chance card: “Make general repairs on your property – for each house pay $25, for each hotel pay $100.”

LESSON: You never know what card you’re going to draw. But unlike Monopoly, the real world has home insurance available to help you prepare for unexpected repairs and disasters. A variety of plans, customizable to any budget, are available. Some homebuyers also opt for warranties covering potential appliance issues after move-in.

  1. How to win a bidding war

MONOPOLY: Trading properties keeps Monopoly exciting. And there are no strict rules as to how a seller determines to accept an offer. Sibling rivalry, bribes involving candy or even business sense can play into a player’s decision.

LESSON: Sellers don’t always accept the highest offer. Writing a letter about why you fell in love with their home can sometimes sway their decision in your favor.

  1. The importance of strategy

MONOPOLY: Monopoly is a game of strategy, but few players are inclined to study ways to win. What if you had a coach sitting next to you, advising how much to bid for a property, where to look next, and whether or not mortgaging a utility to buy Boardwalk is a smart idea? You would be unstoppable!

LESSON: Buying a home is an infrequent occurrence; for some it happens only once in a lifetime. Wouldn’t it be helpful to have someone on your side that is up-to-speed on laws for your state, knows which neighborhoods would best fit your lifestyle and helps you navigate a bidding war? That’s the value an experienced agent provides.

2019 Real Estate in a Digital Age

Did you know that the three most popular information sources home buyers used in the home search were:

  • Online website (93%)
  • Real estate agent (86%)
  • Mobile/tablet website or app (73%)

Outdoor Kitchens Continue to Be Major Draw

The appeal of outdoor living continues to be important to homeowners, and the outdoor kitchen is at the center of that. The latest American Institute of Architects Home Design Trends Survey shows that outdoor kitchens are among the most wanted kitchen features in new architectural projects.

Nearly 50% of the architect respondents surveyed reported the popularity of outdoor kitchens is still growing. The popularity is seen in markets across the country, and not just in warmer climates like Florida, Texas, and California—outdoor kitchens are also taking hold in colder areas like the Northeast.

Read more in REALTOR® Magazine…

What the Fed’s Rate Cut Means for Buyers

The Federal Reserve recently cut interest rates for the first time since the Great Recession took hold in 2008, though the move is not likely to deliver significant juice to an already favorable borrowing environment for home buyers. The federal funds rate, which is what banks charge one another for short-term borrowing, will now hover between 2% and 2.25%, according to news reports.

The Fed says its decision to lower interest rates, which comes after months of pressure from President Donald Trump, is designed to stave off the threat of an economic downturn. But it’s unlikely to translate into additional mortgage savings for many buyers. With the interest rate for a 30-year loan already hovering below 4%, the Fed’s move may be more meaningful for buyers with other types of financing, says Lawrence Yun, chief economist for the National Association of REALTORS®. “Many borrowers will benefit, especially those with adjustable-rate mortgages and commercial real estate loans,” Yun says. “The longer-term 30-year fixed-rate mortgages will see little change in the near future because they had already declined in anticipation of this latest move by the Fed.

“These low interest rates will partly help with housing affordability over the short-term. Both rents and home prices have been consistently outpacing income growth. The only way to mitigate housing-cost challenges as a long-term solution is to bring more supply of both multifamily and single-family homes to the market,” adds Yun.

Still, lower borrowing costs are helping buyers manage rising home prices. For example, buyers who spend $1,500 on monthly mortgage payments can afford to purchase a $402,500 home this year compared to $367,500 last year, when mortgage rates averaged 4.57%, according to realtor.com®. “Last year, buyers would have needed an additional $145 a month on top of the $1,500 to afford a $402,500 home,” says Danielle Hale, realtor.com®’s chief economist.

In some locales, buyers’ money can stretch even further. “An extra $35,000 in purchasing power, depending on where you are in the country, can really make a difference to buyers today,” Hale says. “It still counts, even with home prices up 6% nationally. That increase in purchase power is greater than the national price increase.”

Source: REALTOR® Magazine

Housing Options Expand in King County

King County residents will have more options for owning a home thanks to a new law championed by REALTORS®. As Seattle and King County continue to experience greater demand for housing and an uptick in home prices, a coalition of housing advocates worked with the Legislature to pass a condominium reform measure that will make condo construction more attractive across the state.

The result: More housing choices for more people in King County.

Read more…