On 1 January 2012 the federal government extended a waiver of the “Anti Flipping Regulation” which prohibits FHA insured mortgages for a single family property if the contract of sale is executed within 90 days of the acquisition of the property by the seller. The extension will be in effect until 31 Dec 2012. This regulation was originally implemented in an effort to protect homebuyers from investors reselling properties with an “artificially” inflated value. The regulation had the effect of increasing carrying costs to the investor which of course would eventually be passed on to the buyer which further contributed to the escalation of home prices. The rule also prevented FHA borrowers from taking advantage of recently renovated homes that could be sold within the 90 day period to buyers using non FHA insured loans.
In early 2010 HUD determined that a temporary waiver of this regulation on a nationwide basis may contribute to stabilizing real estate prices and neighborhoods. Since the original waiver went into effect on February 1, 2010, FHA has insured nearly 42,000 mortgages worth more than $7 billion on properties resold within 90 days of acquisition. With the extension of the FHA “Anti Flipping Regulation” waiver the federal government has admitted three things:
- That implementing the waiver increased the availability of affordable homes for first time buyers and other purchasers and has helped stabilize real estate prices.
- That other government measures such as the Home Affordable Modification Program (HAMP) have failed to keep families in their homes and reduce the foreclosure rate.
- That private enterprise is the solution to improving the housing market and national economy.
The drop in foreclosures now being seen across the country can be directly attributed to the stabilization of home prices which is good for home owners and the entire economy. If recognizing that removing a regulation benefits the housing market is that not also an admission that reimplementation of that regulation is detremental and would hurt the economy? Is this yet another example of how over reaching government meddling in a free market economy serves to stifle growth and prosperity? One thing is certain. Now is the time to invest in real estate. With record low interest rates, drastically reduced prices, and rising rental rates investors are buying up the forclosure inventory and bringing new life into the real estate market.