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Radian Group Inc. Message Board

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  • get_imaginary get_imaginary Jun 13, 2011 12:21 PM Flag

    FHA Loan Limits Oct. 1st

    I know that. The question is whether these higher priced houses will continue to sell at the rate they have been since they were made eligible for FHA loans. It seems highly likely the rate of purchasing in that category will drop. Maybe significantly. There's been a recent flurry of activity from people trying to get into these homes before Oct 1. That alone suggests the FHA factor is a significant driver for purchasers of these properties. It's not realistic to expect that the market will remain at the current level once that market driver goes away.

    Don't get me wrong. I'm long RDN and in fact it's now my largest holding. But I think the expiration of the temporary FHA limits will have little or no effect. It does reflects a general healing trend, however, and that's what I see as positive about it. But healing doesn't mean a sudden pop in revenues. It means a continued, gradual trend of decreasing losses and increasing revenues. Possibly with a fair number of setbacks along the way. That -- plus the fact that we *need* the private MIs -- is my investment thesis.

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    • Realtors in San Diego County CA will be very thankful for the existence of private mortgage insurance, on Oct. 1st, 2011.

      • 1 Reply to profit7777
      • I doubt it. Rancho Santa Fe and the La Jolla cliffs don't see much real estate turn over. And the people who buy there don't take out FHA loans. The FHA limits were significant for places like San Francisco and NYC where a modest two bedroom home costs millions. In those places, high-limit FHA loans make the difference between renting v. buying, but not in San Diego.

        Here are typical prices for homes in San Diego: Mira Mesa is as centrally located as it gets and homes there are selling for 300-400K -- well below the 475K that will be the new, lower limit for FHA loans in San Diego county.

        I do agree that there will be some benefit to the private MIs. I just don't see this as a giant windfall. If you have hard data that shows otherwise, I'd be open to changing my mind about that, though.

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