As 2016 comes to a close at the end of the month, the Federal Housing Administration (FHA) is shaping 2017 as a big year for investors and buyers alike.
According to Rob Chrisman of Mortgage News Daily, it was recently announced that the FHA is increasing its loan floor from $275,665 from the original $271,050 for one-unit homes (single family residences) effect in 2017. For those outside the know: The FHA insures banks on the loans they write to prospective homebuyers making their investments more secure. As the amount of insured lending increases, buyers are suddenly facing a larger inventory from the options available.
In cities with a mid-range median price, the loan limits are more flexible starting on January 1, 2017:
2016 FHA Loan Limits for Suffolk County
1-unit home: $598,000 (from a previous $523,250)
2-unit home: $765,550 (from $669,850
3-unit home:$925,350 (from $809,700)
4-unit home: $1,150,000 (from $1,006,250)
Data provided by Justin Bitler of Wintrust Mortgage
The inventory should also be changing for those interested in using the FHA’s assistance - which most first time and young buyers should be.
Given that these changes will lighten the restrictions on condominiums and what constitutes an approved property for FHA financing, more condo associations are moving back into the FHA fold. The Chicago Tribune notes that this should open up sales and purchases to thousands of condo units in addition to creating a fairer market for everyone to take part in.
These changes benefit sellers in the sense that as the market changes and demand increases, there is more power to those looking to put their inventory throughout to those with FHA-insured loans.
First, the previously noted increases to loan limits should help sellers decide on stronger selling points for their listings. For example, now that the loan limit for a 3-unit home has been increased to $967,950, selling owners can create a listing that more closely matches this limit (on the condition that their home meets the 3-unit requirement).
Second, the process for those selling a condominium-based property has become all the more enticing. The biggest change here is the FHA’s changes to the minimum owner-occupancy required for FHA insurable properties. Previously, any condo property required a 50% occupancy rate which disqualified large numbers of condo associations and, as such, discredited the sellers trying to meet an appropriate listing price. The change now requires a 35% occupancy rate which makes the FHA requirements more inclusive and, as such, benefits those looking to sell to buyers who can afford the proper listing prices.
As was mentioned in the previous section, this means more condo associations are entering the market with confidence.
The buyer pool is now substantially higher as first time owners are, as we mentioned last week, perusing the market with the right FHA-based assistance. This puts more of a demand in our market and applies pressure to an already limited inventory meaning that now is the time to sell to make a considerable (and insured) return.
Likewise, the changes to the relationship between FHA-approved loans and condominium properties benefits both parties as buyers find it easier to move into condos on the market and sellers are looking to make a considerable return. Condos are now being considered home properties and, instead of making rent-based payments, buyers can pursue opening a mortgage on these newly classed homes.
These changes overall create a more inclusive market wherein buyers and sellers can negotiate through safe and insured means. It’s something that’s changing the way property owners are looking at their listings - something which means they may be reconsidering the prices they’re at to the benefit of a buyer or, as may soon be the case, to making a stronger return on investment.
In general, the 2017 increases will have a major impact on the market moving forward. This is a significant development for everyone involved in real estate and an even bigger turn for those looking to get involved! You can bet that in the next few weeks listings will be adjusting their prices to more closely match a higher FHA loan amount meaning now is the time to take action if you're still on your search for a new place.
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