Condominiums

New FHA Rule Will Ease Condo Approval Process

The long-waited Federal Housing Administration (FHA) rule regulating condominium lending was finalized Wednesday afternoon.  The Department of Housing and Urban Development (HUD), the parent agency of FHA, published the final regulation and the policy implementation guidance establishing a new condominium approval process.

As a way of background, under existing rules, to obtain an FHA mortgage a borrower must not only satisfy the lender and the FHA that he or she is a qualified buyer but must purchase a unit that is itself qualified for financing. 

According to the National Association of Realtors®, FHA has put its stamp of approval on many complexes, but given the universe, not nearly enough. Of the more than 150,000 condominium projects in the U.S., only 6.5 percent are approved to participate in FHA's mortgage insurance programs.   

To be approved under existing rules, condo communities must submit a pile of paperwork, be vetted by the administration, make any improvements specified by FHA, and then submit to a reexamination. Specified requirements cover the percentage of owner-occupied units, budgetary reserves, insurance coverage, and HOA dues collections. There are also location requirements related to transportation access.  FHA said its requirements were intended to "make sure that the property remains in good standing and will be desirable."

These requirements often left buyers selecting a condo only to find they could not obtain an FHA mortgage for which they were otherwise qualified. This has had implications for homeownership, especially for low-income borrowers, those with less than perfect credit scores, or with downpayments below the minimum level to obtain other financing.  This has become increasingly problematic as prices for single-family homes have escalated, making condo purchases more important as an option for entry-level buyers.

The new rule, which becomes effective on October 15, will allow a homebuyer to obtain an FHA mortgage for an individual condo unit in an unapproved condominium project if that project is completed and meets the following criteria:

  • In a development with fewer than 10 units, no more than two can be insured by FHA.

  • In a development that exceeds 10 units, a maximum of 10 percent can be insured by the FHA.

  • A minimum of 50 percent of project units must be owner-occupied.

The rule change also extends the certification period from two to three years and expands the eligibility criteria for mixed-use units.

HUD estimates the new rules will make an additional 20,000 to 60,000 condo units eligible for FHA insured loans each year.

HUD Acting Deputy Secretary and FHA Commissioner Brian Montgomery said, "Today we are making certain FHA responds to what the market is telling us. This new rule allows FHA to meet its core mission to support eligible borrowers who are ready for homeownership and are most likely to enter the market with the purchase of a condominium."

BY: JANN SWANSON

New Apartments in Napa

Rents at emerging 282-unit complex start at $2,384. These apartments are just north of another housing project, 49-unit Stoddard West apartments for low-income families sponsored by the Gasser Foundation. Read the full article here or below:

The leasing center for The Braydon, Napa’s new, amenity-rich apartment complex, opened just more than a week ago, and the first residents have already signed leases, moved in and are calling the complex west of Soscol Avenue’s Auto Row home.

Residents can choose from one-, two- or three-bedroom units from 752 to 1,311 square feet. Lease rates for one bedroom, one bath unit start at $2,384 per month, two bedroom leases start at $2,810, and the three bedroom leases start at $3,253.

According to Zumper, a rental website, the average market-rate rent for a two-bedroom apartment in Napa during May was $2,240.

About 20 of the 282 planned units are done, said Easther Liu, national vice president of marketing for Fairfield Residential.

Fairfield Residential is developing the 7.37-acre housing site, which uses a new mailing address of 791 Vista Tulocay Lane. It is located on the west side of Soscol Avenue, just north of Tulocay Creek, with views of the Napa River.

A website for The Braydon shows photos of the sample apartments and the complex, which will also include a co-working space, gated dog park, pool, courtyard with outdoor dining space and cabanas, fitness center and “social lounge with full kitchen and multiple seating nooks.”

Once completed, a total of nine buildings will contain the almost 300 apartment homes at The Braydon. A leasing center, located next to a roundabout at the middle of the complex, is now open and staffed.

Inside the complex, the size and scope of the project — one of Napa’s largest apartment developments — is apparent. Chain link fencing wraps around the extensive construction project, which stretches both north and south of the leasing center and the first completed apartment building. The square footage of the apartment housing totals 278,256 square feet.

Napa’s Gasser Foundation originally launched the development, which was formerly known as Vista Tulocay Apartments.

The Gasser Foundation agreed to sell the then-Vista Tulocay site to BLT Enterprises for $9 million in 2002, but the sale did not close until 2013 because of flood control and entitlement delays.

Fairfield Residential bought the project from BLT Enterprises in February 2017 for an estimated $34.25 million.

The apartments are just north of another housing project, the 49-unit Stoddard West apartments for low-income families sponsored by the Gasser Foundation.

Stoddard West previously announced rents will be in the $475-to-$1,300 per month range, depending on the tenants and the number of rooms in the apartment.

Stoddard West, a partnership between Gasser and Burbank Housing of Sonoma County, closed its application list after receiving more than 500 applicants.

Liu declined to provide the number of applications Fairfield has received for the Braydon units.

Millennials Are Increasing The Demand For Condominiums

I know a lot about the Condominiums in St. Helena and Yountville in Napa County and have seen an uptick in the interest to purchases. Condominiums are more affordable in a lot of ways which makes them a great starter home, second home or downsize.

When deciding to buy a home, people are presented with many different options. The type of home you buy depends on your needs, budget, and in many cases, the desired maintenance level. For many millennials, their choice has been buying a condominium!

According to CoreLogic,

Last year about 43% of all condo home-purchase mortgage applications were submitted by FTHBs… Similarly, the data show condos were more popular with young homebuyers and empty nesters. For instance, 21% of all condo home-purchase mortgage applications were submitted by buyers aged 18 to 30, compared with just 17% of all single-family home-purchase mortgage applications by the same group in 2018.”

With home prices increasing year-over-year, it makes sense millennials are buying condos instead of a single-family house. As a result, the demand for this type of home has been increasing.As this graph explains,

The younger millennials are the largest cohort and are likely to drive much of the condo demand in the coming years”.

millennials and condominiums.jpg

Bottom Line

If you are a millennial considering buying a home, understand that there are many options available. You may find yourself in a condominium as your first home. If you would like to determine which type of home best fits your needs, sit down with a real estate professional that can help evaluate your options! I’m happy to help if you are in northern California.

kate.spadarotto@compass.com

c. 707.321.6231