[quote=livinincali]FHA default rates are up around 10% right now. FHA MIP has been skyrocketing as that default rate has increased and FHA reserves have gone negative. The reason FHA got so popular is it was the only high leverage game in town when the bubble popped. The saving rate in the nation is a record lows. At some point you need the underlying economy and wages to push housing up. You can game it high with increasing amounts of leverage and lower rates but that only lasts so long.
That’s why I’m of the belief that right now or in the next year might be a really good time to sell. Almost every market condition in terms of rates, leverage, constrained inventory, etc. is in the sellers advantage right now. You’re looking for an improving wage and employment situation without any impact in rates to really push it higher on fundamentals.[/quote]
livinincali, I could understand why the Kansas City market has to cater to “high-leverage” borrowers in most areas there, but I don’t understand why CA coastal markets do. Why do “very desirable” markets with a “captive audience” (such as SD Co) need to cater to “high-leverage” borrowers? Before 2000?, FHA loans only represented <5% of overall purchases in SD County. Back then, the local FHA ceiling was set in line with the likes of SFR pricing in Spring Valley, Lemon Grove (just barely) and other similarly-situated communities in the county .... as it should be.
I don't understand why the ceiling EVER rose beyond $300K in SD County. Certainly, with the recent run-up in local home prices everywhere (2013), $400K should be the current max FHA mortgage available in SD County ... the absolute max. $400K is a HUGE mortgage for a moderate-income buyer.
In a nutshell, why is the FHA attempting to serve households with more than the "average income" in a particular county? It doesn't make sense. That is the sole purpose of fannie, freddie, portfolio lenders and the VA (for eligible vets only, regardless of income). It was never and is not today the FHA's role to provide this level of leverage.
