A landslide of FHA foreclosures are creeping up on us. Last month I read a riveting article on The Wall Street Journal website. The article stipulated that mortgage default rates were declining for nearly most loan types with the lone phenomenon being FHA types of financing. Those default rates had actually amplified.
Why you may ask? Well, when the market fumbled, the government initiated tax incentives for first time home-buyers and hordes of potential new buyers flooded the market. Many of those consumers were cash strapped therefore most were encouraged to use Federal Housing Administration financing for the low down payment opportunities. And, in countless states, if a buyer used this financing there were programs for $100 down payments. Some states still grant this program while others have abandoned it. My mind began to rattle when I began to think about what actually has taken place over the past couple years.
Here is my evaluation. During 2008-2010 the cash strapped buyers ran towards getting their piece of the American Dream: home ownership. Most of those buyers didn't consider the probability that they may not have a gainful line of employment in 2 years. While most were poised and ready and could actually afford the 3.5 percent down what they didn't take in to consideration was that the world economy was going to continue to decline. And, plenty of first time buyers that took advantage of the first time home buyer tax incentive are now in the unemployment line. They are defaulting at an explosive rate.
Additionally I understand that the government is going to elevate the down payment for FHA types of loans. This is really going to bruise our industry. Federal Housing Administration financing was put in place to give a lift to first time home buyers when purchasing a house by offering low down payments. Elevating the minimum down payment for these types of loans will put the home out of reach for many home buyers. It is truly a catastrophe in the making. While one person's catastrophe is another man's opportunity this will open many new sales options for real estate investors. Essentially, less competition in the market place will empower investors to rush in and pick up awesome deals on homes.
I'm really not sure how all of this is going to wash out in the foreseeable future but I can say that we are in uncharted territory. My best forecast is that troubling times are advancing. If the home buyers that purchased homes between 2008-2010 and used fha financing continue defaulting there is going to be a tidal wave of FHA foreclosures coming on the market. This will amplify the inventory of HUD owned homes coming on the market place. I'm guessing HUD will slowly cut loose these homes a little bit at a time as they will not be in any hurry to liquidate. IF they did rush it then it would crash the market. So, look for HUD sales to be the new gold standard in real estate of the future. No doubt about it!
Why you may ask? Well, when the market fumbled, the government initiated tax incentives for first time home-buyers and hordes of potential new buyers flooded the market. Many of those consumers were cash strapped therefore most were encouraged to use Federal Housing Administration financing for the low down payment opportunities. And, in countless states, if a buyer used this financing there were programs for $100 down payments. Some states still grant this program while others have abandoned it. My mind began to rattle when I began to think about what actually has taken place over the past couple years.
Here is my evaluation. During 2008-2010 the cash strapped buyers ran towards getting their piece of the American Dream: home ownership. Most of those buyers didn't consider the probability that they may not have a gainful line of employment in 2 years. While most were poised and ready and could actually afford the 3.5 percent down what they didn't take in to consideration was that the world economy was going to continue to decline. And, plenty of first time buyers that took advantage of the first time home buyer tax incentive are now in the unemployment line. They are defaulting at an explosive rate.
Additionally I understand that the government is going to elevate the down payment for FHA types of loans. This is really going to bruise our industry. Federal Housing Administration financing was put in place to give a lift to first time home buyers when purchasing a house by offering low down payments. Elevating the minimum down payment for these types of loans will put the home out of reach for many home buyers. It is truly a catastrophe in the making. While one person's catastrophe is another man's opportunity this will open many new sales options for real estate investors. Essentially, less competition in the market place will empower investors to rush in and pick up awesome deals on homes.
I'm really not sure how all of this is going to wash out in the foreseeable future but I can say that we are in uncharted territory. My best forecast is that troubling times are advancing. If the home buyers that purchased homes between 2008-2010 and used fha financing continue defaulting there is going to be a tidal wave of FHA foreclosures coming on the market. This will amplify the inventory of HUD owned homes coming on the market place. I'm guessing HUD will slowly cut loose these homes a little bit at a time as they will not be in any hurry to liquidate. IF they did rush it then it would crash the market. So, look for HUD sales to be the new gold standard in real estate of the future. No doubt about it!
About the Author:
More about how to be a real estate agent, visit our site for a HUD 9548today.. This article, A Surge Of FHA Foreclosures Are About To Hit The Market has free reprint rights.
0 comments:
Post a Comment