Thursday, April 2, 2009

Fannie Makes It Harder to Buy Condos?

I'm a little late getting out the 'press release' type post on this data, but I've been too busy selling condos. Actually that's not meant to be a joke. I've been selling condos lately, but the buyers have been paying cash.


I have heard from my lenders that condo financing is scarce, so I take that as anecdotal, local evidence in support of the March 18 story run by the Wall Street Journal about Fannie's new stricter condo financing rules. (the article link is just a stub, most of which is reprinted below)


Just as a flood of new condominiums are scheduled to hit the housing market this year, Fannie Mae has added restrictions making it more difficult for developers to sell their units.


The government-backed mortgage-finance company stopped guaranteeing mortgages in condo buildings where fewer than 70% of the units have been sold, up from 51%. In addition, the company won't back loans for sales in buildings where 15% of current owners are delinquent on association fees or where more than 10% of units are owned by a single-entity.


It's a shame that it's getting harder to buy condos using a mortgage. Public opinion is already out on this rule change. One side says "lending on a condo where 15%+ of the owners are late in their HOA fees is a crappy idea and this rule change is correct." The other side says "Fannie's rule change makes it harder to buy condos just when the market needs looser lending standards in order to recover." Call me Obama, but I see the sense in both sides of the argument.


What do I know for sure? I've seen some absurdly low pricing lately for metro Phoenix condos. The most silly-ridiculous low I've personally seen is about $40,000 for a giant sized (837 sf) 1 bedroom condo located a few hundred feet north of the intersection of 16th Street and Lincoln Drive/Glendale Avenue, at the Greenview Condos.


Locals will recognize this is a seriously decent neighborhood on the border of the Biltmore district, close to downtown Phoenix's shopping, dining and sports complexes, and at the foot of the Piestewa Peak mountain preserve.  Plus the condos are located in the Madison Elementary School District. These schools consistently rank "excelling" which is as good as it gets.


Greenview are old apartments converted to condos sometime in 2006 or so. Countertops and cabinets were painted, and each unit seems to have received new flooring and paint, new fixtures and hardware. No, it's not slab granite, but it's very very nice. Plus, slab granite would be overkill in this price range.


If you're interested, and you've got cash to spend, email me for a list of under $75,000 condos in metro Phoenix. Investors, take note: rents are about $750/mo but the $300/mo Homeowners Association fee that covers electric to the unit will kill your profit margin.