The ONLY Constant is Real Estate CHANGE in 2014

Yesterday we reported on the New FHA Mortgage limits being reduced on January 1 (Full story here) and wanted to take a moment to hear comments from some Tucson real estate professionals who are looking at the larger picture and could put the FHA changes into perspective.

Everyone we spoke with expressed concern with the new regulations on an already fragile housing market recovery.

But, as Tucson Association of Realtors’ immediate past president, Cathy Erchull with Tierra Antigua Realty in Tucson summed it all up nicely when she said, “The only constant in real estate is change. We adjust constantly to changes in this business and will adjust to more real estate change in 2014.”

Paul Volpe with Nova Home Loans in Tucson ran stats on their loans in 2013 as soon as he heard the news. “Of the 1,000 loans they are set to close on for 2013, there were 11 that would have been affected by the FHA loan amount change,” Volpe told us. “Of these, only 7 were new purchases and the other 4 were for FHA refinancing. That would still be 7 families who may have not been able to buy a home at all, if they were buying in with the new 2014 limits.”

Erchull explained, “The median sale price for homes in Tucson is $159,500, still well below the $271,050 FHA loan limit. Other markets, like Phoenix metro area will be much more affected than Pima.” (Full story here)

According to DepartofNumbers.com as of December 9, 2013 the median asking price of new homes listed in Phoenix was approximately $250,000. The median asking price for homes in Phoenix peaked in April 2006 at $333,800 and is now $83,800 (-25.1%) lower. From a low of $139,960 in January 2011, the median asking price in Phoenix has increased by $110,040 (+78.6%) to $250,000.

FHA changes have been frequent and significant this year. Since June, FHA has become less attractive to borrowers. As the Real Estate Daily News reported on June 7th, when the FHA mortgage insurance premium (MIP) rules changed the minimum time a borrower must hold mortgage insurance to 30 years and rescinded the automatic cancellation of annual the MIP. (Full story)

Volpe explained, “Although the FHA interest rate is lower than conventional loans, this rate gets offset by the MIP, and has lost much of its incentive to a borrower when payments for the life of the loan are more expensive than a conventional loan.”

The FHA loan limit change takes place January 1, 2014. This means an FHA case number must be assigned prior to that date and include a purchase contract on a property, in order to qualify under the 2013 loan limit of $316,250.

Bill Anastopoulos, owner of Gold Coast Mortgage Group, a private money lender commented, “The more government and conventional lenders regulations occur, the better his business becomes. Borrowers who do not meet institutional guidelines benefit from the use of private money. Hard money (private money) fills a niche in mortgage lending and provides alternate funding options for clients who have specialized needs or too many credit problems for conventional financing.”

As borrowers and real estate professionals look for options in 2014 to keep our housing market vital, we have no choice but to adapt to these changes. The next regulation in the pipeline for January 10, 2014 will be the qualified mortgage requirements that is part of the Dodd Frank reform bill and will restrict debt-income ratios on loans, so stay tuned and get ready to adapt.

For more information, Volpe can be reached at (520) 618-5626. Anastopoulos should be contacted at (520) 299-3745. Erchull is at (520) 290-2335.