Haven’t you noticed that many of the people who buy those flips let them go once they move in? I’ve lived in working class neighborhoods before, and the typical FHA 3.5% buyer does not maintain the house once they move in, whether it was flipped or not. Within 3 years or so, it’s back to the overgrown landscaping or dirt lot with 5 cars parked in the yard, trash everywhere, dirty, falling fences, etc. These flipped homes are often the first to be foreclosed on, too.
The very WORST were the absentee landlords who would literally let the homes rot.
I’d still rather have affordable housing for owner occupants. That should be the priority. Of course, I agree that people should at least maintain their properties — and the standard for that varies from person to person, of course. You and I both like neighborhoods without HOAs specifically because the Nazi HOA rulers cannot tell us what plants to plant, or what color paints to use, etc.; but that also means we have to put up with some neighbors whose homes will be eyesores. I don’t like it either, but still prefer it to flippers infesting the neighborhood and pushing up prices beyond what owner-occupiers can truly and easily afford.[/quote]
CAR, the “flips” in my area haven’t been resold for quite three years, so I don’t know the outcome yet. But I do feel it is not worth it to take out an owner-occupied FHA loan today. Most FHA buyers (usually first-timers) are ignorant of all the commitment that homeownership entails and most of their DP is now applied to up-front MIP and is NOT used to reduce the mortgage they will take out. Due to the now VERY high MIP, a prospective FHA buyer would be better off renting, IMHO, while they save more $ to purchase conventional. Honestly, I don’t think the FHA 203(b) program is viable anymore and I think it should be abolished. The agency screwed itself royally in recent years by insuring mortgages over ~$300K. Even that amount is high for its target borrower in SD and VERY HIGH for other, inland locales. Back in the 80’s, there were even weekly lists published in the SD Union of local FHA foreclosures being offered to the public through a sealed-bid system (avg of about $77K back then). Now, FHA’s default rate is SO MUCH HIGHER than it was back then at FAR higher loan amounts.
The typical FHA borrower (then and now) can barely score a used lawnmower after closing without quickly running up their CC debt to an unsustainable level, making it impossible to pay their new mortgage AND service their CC debt.
The only people who should be buying “fixers” should be those putting 20%-100% down with liquid cash reserves of at least $80K (in case something goes wrong with the rehab). That brings us back to the flipper teams, gen’l contractors and VERY experienced carpenters/handymen.
I have come to the conclusion that a typical 40-hr per wk “wage earner” with a family who is taking out a >80% mortgage is a bad buying candidate for a “fixer property.” It will likely take this type of owner-occupant buyer too long to complete the needed repairs without additional help, causing them to have to carry the mortgage without use of all or part of the property for many months or even years. And unless they have purchased for a VERY low price on cash terms, the potential “equity” isn’t usually there to contract out all the needed repairs and replacements.
There are no doubt thousands of first-time FHA homeowners who never should have been homeowners to begin with as they’re not (fiscally or psychologically) prepared to regularly maintain real property.
I believe “affordable housing” should be strictly rentals to the extent that local laws and local funding provides for them. If some locales (more desirable and/or coastal) don’t have enough of this type of housing to offer all the residents who want it and can qualify for it, that’s the way life is. The most desirable portions of coastal counties have never been “set up” to house the masses of poor and working poor. I realize that every locale needs its service workers and they have to live somewhere but everyone has to live where they can afford to. For San Diego County, if that is TJ, a long commute inland from their coastal job, a subsidized apt, living with parents/other relatives or renting a room close to work, so be it.
