FHA Loans: The Next Real Estate Mess | General Homebuying Discussion | Boise Real Estate Forums

You've heard that when you buy a new car and the minute you drive it off the lot, it's already worth less than what you just paid for it, right?  Parts of the Ada County Housing Market might be the same!  First it was ARM's (Adjustable Rate Mortgages), then it was the 'Pay Option' Arms, next will be FHA Loans.

I was digging around on some real estate stats in Paragon (the MLS) and found that 1 year ago (Oct. 2008), the Median price for homes in Ada County was $198,500, no surprise right?  Since that time, 30% of the single family home sales in Ada County have been financed using an FHA Loan.  Today, the median price for homes in Ada County is $155,000.  That's a 22% drop.  Ugh.

Already Upside-Down

All things considered, not all of the 1600  or so FHA buyers who bought in the last 12 months did it exactly 1 year ago.  But, I think it's worth considering that since FHA only requires 3.5% down, most, if not all of the people who have purchased within the last year are already significantly upside-down on their homes.  Some of them by more than 20%.

If they had to sell and need to hire an agent, there would be nearly another 7-8% of expenses associated with the sale.  That puts them over 25% in the hole!

Terrible Buyers Representation & Consultation

Hopefully, these buyers weren't herded into  suburban subdivisions that offer no real amenities besides upgraded carpet and kitchen counter tops, but into sustainable areas of town where over the long term will not only enjoy where and how they live, but will be hedged against spiraling declines that have plagued the bulk of these mega-subs.

Many agents, still hanging on by the hair of their chinny chin chin will sell anything–especially on the premise that it is a 'smokin deal'–the last step before the home actually spontaneously combusts and becomes a fire-sale.

Thoughtful Purchases Will Come Out Ahead

Perhaps some took the opportunity to get a good deal on a home near downtown, or within walking or bicycling distance from work or school.  Maybe some of them sacrificed cute paint and stainless appliances for a good location with natural amenities like the Boise River Green Belt or good access to the Ridge to Rivers Trails system.  I know there are a good handful of buyers who were smart enough to consider the overall location of their purchase rather than the glitz and glimmer of how a home looks.  Those will be the ones who, after a shorter period of time will be able to sell their home without having to get an approval by the bank.

FHA & The Buyer Tax Credit (some call it a bribe)

An FHA loan is a good financial tool.  But it looks very similar to rubble left by the 0% down garbage  that we are currently trying to dig our friends and families out of–maybe even ourselves.

Only the Federal Government could be so generous to lend money that isn't theirs.  At the end of this home buyer bribe dressed up like a tax credit, and after the Department of Housing and Urban Development runs out of money to insure these unsustainable loans (some time in March 2010), you'll see interest rates climb up now that the real world banks will be the ones who have to take on the risks of these barely creditworthy (in many cases) home buyers.

Then, it might be a really good time to buy!

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