Britta Rivera Venture

CHICAGO REAL ESTATE NEWS & MORE

2011: FHA DROPPING HOME PRICE LIMITS THIS FALL?

The housing market has been in a slump for several years now.  But to add to the challenges many home buyers and sellers are facing, new guidelines could cause more problems.  This fall The Federal  Housing Administration is expected to drop the size of loans the government agency will insure, from $410,000 to $365,000.  

FHA expects the cut in loan amounts to take effect October 1, 2011.  While many home prices are already at record low levels, this sill would affect over 2 million owner-occupied homes, according to the National Association of Home Builders.  If the new limits are put in place as expected, many home buyers may consider purchasing less expensive homes if they are in need of FHA financing, putting sellers in a unfortanate situation.  Do they cut pricing more to accept an FHA buyer, or wait it out?

Although in past years a high number of buyers obtained conventional loans, in this market many have chosen to go with FHA financing, due to their more flexible guidelines.  While FHA loans initially were intended for first-time or lower-income buyers, there was an increase in market share, after Congress raised the loan limits as part of the Economic Stimulus Act back in 2008. 

DataQuick Information Systems reported that  approximately 35% of Chicago-area home loans were FHA-insured in February, which is an increase of 2.4% from just a year ago.  The past few years have seen even higher increases in FHA loans, causing many building developers, to become FHA approved to handle the demand.

With the new loan limits being considered and the increase from 3% – 3.5% down for FHA financing, this just adds to the already depressed market.   However, many may want to still consider purchasing a home, because rents are continuing to increase and many experts report they will see a 10% rise, by the end of the year.  In many cases, it will be cheaper to own than rent.

RENT, BUY OR SELL IN CHICAGO…Start viewing incredible homes or register here for assistance.

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June 30, 2011 - Posted by | REAL ESTATE NEWS | , , , , , , , , , , ,

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