Madison Wisconsin Homes and Real Estate: FHA Owns Bigger Share of Housing Debt, Now Charging Bigger Chunk of Mortgage Payment

Monday, April 18, 2011

FHA Owns Bigger Share of Housing Debt, Now Charging Bigger Chunk of Mortgage Payment

Dan Green writes The Daily Mortgage Report and his post is of interest to me because FHA insured mortgages are the fuel for mortgage financing today. To increase their mandated reserves, beginning today the annual cost of a $200,000 mortgage is going up about $500.00. With the FHA the major game in town for mortgage financing, an increase in the cost of the mortgage is downward pressure on offers. Everytime I hear a real estate expert spin an isolated incident into a story about real estate prices rising, I wonder about two things: one, the author's motivation, and two, the author's awareness to reality.

As long as competition for mortgage business is restricted for the many, the opportunity for competition to move prices north will not happen. As long as the buyers are walking in and out of homes priced at huge discounts to unload bank owned property, the buyer will not be agreeing to higher prices/values of non-distressed properties----even if the buyer prefers the non-distressed property, the perception of value based on what they are seeing, is driving decision about price to offer.

Karen Rivedal writes Property Trax for Madison.com and Karen understands the importance of looking deeper and questioning the spin doctors. Karen's a follower of What's Happening in My Neighborhood??? blog, an offering on real estate results at a hyper-local level, and this is she had to say last week: "And the data is arguably more practical, focused on things an average would-be buyer or seller in those areas would like to know...". There are some Buyer markets in Dane County, but there are some Seller markets too. Just as the spring market is getting a full head of steam, it is certain that the bigger economic picture is going to play a role in the real estate market velocity.

I believe this to be true: The first time buyer in 2011 is planning for this home to be home for longer than 3-5 years. They are inclined to be conservative in deciding on a price to pay. They are willing to have less space and determined to have a safe mortgage payment. Higher mortgage costs will take away from the aount they are willing to finance.

The evidence for prices to go north instead of south may exist, but I think it exist mostly in the imagination or the wishes of some people.

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If Not Sold in the First 30 Days, Successful Sellers Conceded The Price

Through Mid-September, thirty seven percent (37%) of 126 home owners who sold in 2010 sold without making a single price concession. They typically attracted a buyer within 40 days of going on to the market. These successful owners conceded little on price as they sold for about 97%-98% of asking price.

Those who counted time on the market by months or even quarters eventually sold for an average of 91% of their initial asking price. Price reductions improved their success opportunity. Once their price was reduced to a price favorable to a buyer, the time on the market was short--about 34 days from last price change to accepted offer.

See September 20, Buyer Enticing Pricing

Disclosure

The source of data: South Central WI MLS Type of data: Single family homes and maybe condos and maybe other Areas: Madison and other areas such as McFarland, Shorewood Hills, Middleton, Maple Bluff, Oregon, DeForest, Cross Plains, Dane County, Fitchburg, Verona, did I say Middleton? Dates covered in these blog posts: January 2010 and continuing.

All comments are the relatively well thought out opinions of Tom Meyer. Those opinions are not necessarily shared by Restaino & Associates, other brokers, or the national, local, or state associations of Realtors... in fact, they may be significantly different.