I recently read a report that indicated that national home ownership in relation to the countries current population is at its’ lowest level in 50 years. Concurrently, first time home ownership is at it’s lowest level in 30 years. The lack, or inability, of first time buyers to obtain homes/mortgages is almost certainly driving the overall low.
At the same time I saw the story mentioned above, there was another that came out almost simultaneously that showed that the average fico score of today’s home buyer is as high as it has ever been ( I think 755). A persons ability to get a mortgage, largely determines their ability to buy a house. So high FICO requirements predicate low housing purchases, which is obviously what we as a country are experiencing at this time. Not exactly Einsteins theory of relativity, but there it is.
In the meantime, there is much conversation about how to enable more people (particularly those trying to buy for the first time) to purchase homes, as historically home ownership in America has generally been the first step towards an individuals path to financial security. Obviously there have been periods (such as 2005-2010) where this hasn’t worked, but generally speaking, a house purchase has helped us individually and as a country start to build a foundation for financial health and wealth.
Subsequent to the housing debacle referenced above (2005-2010), FHA, FNMA and Freddie Mac instituted a number of different regulations and policy’s that have made it very difficult to near impossible to finance a condo purchase. It is estimated that Condos make up just 2.8% of all housing purchases at this time. This is compared to the 5%+ percentage, that is considered to be more the historical average. In the meantime, Condo’s represent a potentially obvious purchase option for the all important and ever elusive first time home buyer. This is a bi-product of Condos relatively low price points and because the majority of them are located in urban settings and in down towns, or where many of the younger demographic have indicated wanting to be and live. It doesn’t seem difficult to imagine then that trying to remedy the recently imposed and highly restrictive condo financing constraints, will help to kick start first time home buyer inclusion into the housing market once again.
Luckily, I’m not the only observer who has taken note of this issue. In fact there is a bi-partisan bill being generated in Congress (HR3700) as I write, that is designed largely to help amend some of the more constrictive elements of the current lending legislation and regulation, and particularly as it/they apply to the much put upon condo class of real estate. I am of the mind that this bill’s chance of success is very high. High enough in fact, that I will place it under the category of “too obviously beneficial to fail”. Should this bill pass, condo’s will once again represent a very viable option of housing ownership for many who would like to own, but who are not able to right now.
In conclusion, I have no doubt that the anticipated passing of HR3700 (in some form or fashion) will occur and will prove a great leg up for many of today’s hopeful home/condo buyers. This should have positive economic consequences for all of us. Increased housing purchase necessarily drives economic activity, which in turn drives employment, which drives financial security etc… This is not an economic hypothesis so much as it is an economic certainty. Further, it highlights why so many politicians and people who monitor such things want to see our housing industry get back on track.
Note to investors: A bi-product of this bills passing would almost necessarily include a jump in over all Condo values. Increase first time buyer ability to own and you will see more demand at the condo end of the housing continuum. As a result, associate price points should/will rise accordingly. So, if you have cash..which is largely the only medium of exchange that works in condo land currently, I’d highly recommend looking at this type of product for investment. To my mind, Condo’s are “artificially” cheap now, because of the financing constraints referenced. Reduce those same restrictions (via hr3700 etc..) to a more “normal” consideration and I believe you will see a fairly quick (and potentially significant) reversal of overall value in this much depressed property class. In short, should you have the capacity to do so, I’d be an investor in condos.
bullmarketrealty 