Congress locks out ten percent of Dothan home buyers
July 28th, 2008 - Categories: Buying a home in the Dothan area, Real Estate News, Selling a home in the Dothan area
By: Charles Woodall
http://www.dothanhomesearch.com
The U.S. Senate passed HR 3221 Saturday morning, and unless President Bush changes his mind again, he will sign what Congress has named the Housing and Economic Recovery Act of 2008 into law sometime this week.
Among the many problems solved addressed with this legislation, one particular provision will likely have an big impact on the Dothan real estate market. In Section 2113 there is a provision that prohibits FHA from insuring loans unless the buyer puts down at least 3.5% of the appraised value. This provision effectively eliminates down payment assistance programs such as Ameridream and Nehemiah, which have been used by home buyers and sellers to put deals together for a number of years.
Why will this particular item have a profound impact here in the Dothan real estate market? Because these programs have meant the difference between being able to buy or not for hundreds of Dothan residents over the last few years. Through the end of June, there have been 632 homes sold in the Dothan area this year, according to the Dothan MLS. Of these, 145 used FHA financing. While we do not know the exact number out of the 145 that used a down payment assistance program, a couple of mortgage folks I talked confirmed my suspicions and indicated that the vast majority of FHA loans they have processed this year have. Even if the number is as low as 50%, that is around 70 buyers that would likely have been unable to buy. With the passage of this legislation, the Federal Government has effectively taken 10% of our home buyers out of the market.
What does this mean to home sellers? If your home is priced between $60,000 and $150,000, which is the likely price range for FHA buyers, then you will be losing about 10% of your buyer pool effective October 1.
An in-depth look at all the aspects of this legislation is needed in order to weight benefits versus costs. At some point I will share some of these and how they will effect the Dothan real estate market. At first glance however, this little provision will have the most immediate impact, and its not going to be positive.
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