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Thursday, October 15, 2009

New FHA Rules will Flush Condo Values

Items of Interest:

Arizona Republic:
Experts: Plummeting prices have rendered condos nearly worthless -- New federal loan-guarantee rules imposed to fend off future government losses from plummeting condominium prices have rendered condos utterly worthless, Valley real-estate experts said.

The Federal Housing Administration rules, which took effect Oct. 1, prohibit any new FHA-backed loans on condo units in projects that include more than 25 percent commercial space.

In addition, no single investor - including the developer - may own more than 10 percent of the units in a particular project. That particular restriction alone creates a catch-22 from which condo builders most likely cannot escape, said mortgage originator Jill Hoogendyk of Wallick & Volk in Glendale.

Another rule that has sellers and brokers scratching their heads prohibits FHA loans in condo developments that aren't "primarily residential," which could be taken to mean the FHA won't guarantee loans in future mixed-use projects.

"I'm predicting that what we'll see is whole condominium complexes sitting empty," Hoogendyk said...

Mish's Economic Analysis: FHA Rules Render Condos Utterly Worthless
SquareFeet: New FHA Rules Make Life Tough For Condo Sellers
RealtyTrac: New FHA Rules Doom Condo Values

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