Richard's Real Estate Thoughts: January 2011

FHA announced it will extend the property flipping waiver until December 31, 2011, This flipping waiver had previously been in force through January 31,2011.

The waiver basically allows properties purchased within the last 90 days to be sold with FHA financing, with a 20% cap on price increase.

In the announcement, FHA Commissioner David Stevens said, "As I noted when we first announced this policy change early last year, because of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers."

"Today I can report that this policy change has been effective.  Since the original waiver went into effect on last February, FHA has insured more than 21,000 mortgages worth over $3.6 billion on properties resold within 90 days of acquisition."

The flipping rules are in place to prevent properties from being resold with nominal improvements to unsuspecting buyers at above market, "inflated" prices. It is basically a protection against predatory home selling practices.

The existing flipping policy prohibits sales within 90 days of the original purchase, and places limits on property sales that take place between 90 and 360 days of the original purchase.

The property flipping waiver that was announced in January 2010, and is now extended, opens the market to resales within the first 90 days, with the following restrictions:

• All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction
• In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the waiver will only apply if the lender meets specific conditions

This is generally good news, and FHA indicates that the waiver has helped increase home sales. Typically though the 20% above acquisition cost limit is still restrictive for most resales, as the low number of 21,000 resales indicates.

With current tightened lending and appraisal guidelines in place, I suspect that the HUD flipping rules are not needed to prevent resales at "inflated" prices.

Anyway the waiver extension is good news.  

Here is the link to the flipping waiver notice.

Here is the link to the FHA press release of the waiver extension.

The tax deduction for mortgage insurance was extended with the Tax Hike Prevention Act of 2010 (gotta love that name!). There are many tax changes in this bill beyond the big announced extension of the Bush tax credits and the Social Security Tax break for wage earners.

I am not qualified to discuss most of the tax changes, and did not want to voice an opinion pro or con about the larger bill, or the larger deficit.

But with all that is working against the housing market, it is nice that the mortgage insurance tax credit was extended through 2011.

Over the next several months (years?) there will be a running debate over the role of government should have in encouraging home ownership. The result of this debate will shape the housing market for a generation.

At least for this year, home owners will have an interest deduction and a mortgage insurance deduction.

Some particulars:

• Fully deductible up to $100,000 income
• Income over $100,000 reduces the deduction by 10% for each $1000 in income
• Qualified mortgages must have had mortgage insurance issued in 2007 to 2011
• Qualified mortgages included conventional, FHA, VA, and Rural Development

This was a small piece of the overall Tax Hike Prevention Act, but it is nice piece. Many estimates point to a tax savings of $200 to as high as $400 for qualified home owners.

The Walnut Hill Townhomes is a $15 million residential development by Urban Renaissance Group, LLC. It is located on Cherry Street and compliments the ongoing growth of downtown Chattanooga with its architectural design that "blends traditional southern architecture and the best aspects of Chattanooga's urban experience."

• Southern style porches
• Private courtyards
• Attached carriage houses
• Ornamental railings
• Stately columns
• Limestone foundations

In keeping with the local Chattanoogan emphasis on quality and environmentally sound construction the townhomes were build with quality pre-engineered wood products, metal framing, water saving features, and extensive insulation techniques that exceed Energy Star and Earth Craft standards.

Urban Renaissance Group, LLC is a partnership of 3 top Chattanooga builders, well established in the local residential construction: Dale Mabee, Don Moon, and Mike Moon. All three builders have been past presidents of the Home Builder's Association of Southeast Tennessee and are past recipients of Builder of the Year and Developer of the Year awards.

For more information about Walnut Hill Townhomes visit http://www.walnuthilltownhomes.com. Contact Dale Mabee at Cornerstone Realty Group, LLC, 423-894-0156.

 See earlier stages of construction with my previous post, back in August 2008.