Good News for the Housing Market: HUD Extends 90 day Anti-Flipping Waiver through 2011

by Alex Stenback on January 28, 2011

In this housing market, anything that helps more real estate change hands is a good thing, so we were pleased to see that HUD has extended the anti-flipping waiver through the end of 2011.

Originally set to expire Jan 31st of this year, the waiver allowed for the re-sale of properties less than 90 days after acquisition (normally a practice that HUD prohibited) to help the housing market absorb distressed inventory. From HUD:

“As I noted when we first announced this policy change early last year, because of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers,” said Stevens. “Today I can report that this policy change has been effective. Since the original waiver went into effect on last February, FHA has insured more than 21,000 mortgages worth over $3.6 billion on properties resold within 90 days of acquisition.”

For the unfamiliar, this waiver has been instrumental in addressing a key problem: In a housing market with a high level of distressed inventory, many homes are not in “financeable” condition (lenders generally require a property be in above-average or move-in condition, and the bank that owns it is not going to make improvements,) which limits the pool of potential buyers to those who can pay cash, which drives prices lower still.   

This waiver makes it easier for the private market (read: property investors, and others) to purchase distressed homes at a discount, bring them up to FHA standards, then quickly re-sell them at a profit.  Being able to flip these homes in less than 90  days is a key incentive for those in the business – outisde of 90 days, the risks mount (prices could fall, squeezing margins,) capital is tied up longer, etc.

It is a win-win: Banks unload foreclosures, investors turn a profit for their risk, rehab and re-sale work, and new homebuyers have access to more move-in ready housing at very good prices.

{ 1 comment… read it below or add one }

Laura Morton January 30, 2011 at 1:26 pm

This move is good for investors. They can flip until the cows come home. The first time buyer market is just not there. Investors are the ones to get the housing market moving again. I can see Americans pulling money out of the stock market and buying 3 or 4 houses for rentals.

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