They need to be careful how they reduce more people from relying on FHA loans….but I don’t see how things will not get worse from here.
37% of all loans in SD county in April were FHA loans…I am quite sure in the sub 500K market the share of FHA loans is much larger, these are all people with bought with 3.5% – 5% down. Now even if insurance premiums go up half as much as what you mentioned here (FHA loans are already quite expensive), FHA buyers will shrink considerably which in turn will shrink the no. of buyers significantly (there’s no way suddenly more buyers with high downpayment are going to emerge). This will definitely pull prices lower and thus take a lot of the existing FHA owners who have bought in the past couple of years with 3.5% down underwater and lead to more people walking away and foreclosures….another downward spiral. I would suggest people with 20% downpayment should now just hold tight and watch this play out.
