FHA already upped it’s monthly mortgage insurance to 1.15% of the loan amount starting in April. Less than 6 mos ago it was only .55%! They more that doubled it! So if you are getting a $350,000 FHA loan you have $335/mo just in mortgage insurance. They are trying to reduce FHA’s footprint in the mortgage market and one way to do that is to keep jacking up mortgage insurance.

Fannie Mae loans have also recently got a lot more expensive if you have anything less than perfect credit and 20% down. We are headed towards very expensive mortgages unless you have 20% down and perfect credit. This will all impact prices. Maybe even more so in the blue collar areas where FHA loans are more popular. It is getting REALLY expensive to get a 3.5% down FHA loan. And add higher rates into that cocktail too. I can’t see how that doesn’t put a lot more downward pressure on prices for years to come, unless this is offset by a job/income boom.

Saying we will not have the “tailwind” of accommodative lending pushing prices this go around (like we did starting in the late 1990’s) is an understatement.