As development and housing reel from the lack of credit available right now, the fallout is all around us. We know about foreclosure. We know about short sales. We know about property values re-adjusting severely and people being trapped in their homes. This is a problem, for sure, but it can and will be solved by a balancing of supply and demand. It is already getting better….marginally….but better.
Where we go from here is the issue that is more important. The new world of lending is pretty much DIRECTLY AT ODDS with the things that will set us free from the larger mess we are in.
IF we are trying to be greener AND we are trying to reduce out dependence on foreign oil AND we are trying to reduce our carbon footprints AND we are trying to retool our transportation systems THEN WHY ARE WE PUNISHING URBAN DEVELOPMENT?
There is no way to build with any density other than to build vertically. Period.
Take, for example, any multi-family building of 3-5 stories (or any height, for that matter) built in any urban area. The building can be an apartment building with no problem. But if there is to be ownership, we got a problem.
The only way that any vertical structure can have individual ownership is condominium ownership. There is no other way (and do not say co-op, it is even more convoluted.)
Right now, the condominium lending environment is ridiculous. The requirements put onto condo lending call for unrealistic “pre-sold” requirements, interest rate add-ons, lower loan-to-values, a maximum number of investor owned units AND condominium dues are counted against qualifying ratios. The bottom line is that you need to make more money, have more cash to put down and only purchase in condo projects that have a large portion of units already sold.
I could MAYBE stomach these requirements if the same set of rules were applied to single family housing, but they are not. There is not a pre-sold requirement in any single family neighborhood. There is not a check of investor owned homes in any single family neighborhood. There is not an “add-on” to the interest rate and the maximum loan to value is 5% greater than condominiums.
This is the kicker…condo dues typically contain some utility costs and a repair reserve in the budget. This is not accounted for in single family loan underwriting.
It is akin to saying that single family homes do not require repairs and the owners have the option of using or not using water and sewer.
It is not fair. And it is just plain wrong.
If someone chooses to live in their downtown OR wishes to have a space that does not have a yard to maintain, then they should be able to choose to live in that environment without penalty. The current rules say otherwise.
Fannie Mae and Freddy Mac have spoken and they would prefer you live in the suburbs.
See you in traffic.