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Article Courtesy of The Orlando Sentinel
By Mary Shanklin
Published November 29 , 2016
Orlando condo owners and real estate agents are studying
federal reforms they hope will boost what has become one of the nation's
slowest recovering condominium markets.
Restrictions on FHA mortgages for condo buyers are set to ease starting this
month. Under one long-awaited law set to take effect Oct. 27, buyers will be
able to get federally backed mortgages to purchase condos in buildings where
two-thirds of residents are renters. In the past, at least half of residents
had to own units to meet mortgage rules.
"It would boost our
business big time," said Thomas Allen, broker for
Orlando-based Urbanista. "The definition of Florida condo is
rental. It has been since the inception of condos in
Florida. What this would do is drastically boost sales."
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Few regions have struggled more with their condo markets
than Orlando. A decade after the housing market began its
collapse, Metro Orlando's midpoint prices for condos are
$106,900 — still far below their 2006 peak of $182,700,
according to data from Zillow. Only eight other condo
markets in the U.S. have been slower to recover and four of
those are in Florida: Polk, Highlands, Putnam and Alachua
counties.
As cash investors swooped in to purchase Central Florida
condos when their midpoint price was at a rock bottom
$66,000 four years ago, condominium properties throughout
the region became increasingly filled with renters.
Walking his two dogs down South Eola
Drive along a stretch of upscale condominium buildings,
32-year-old Brandon Garceau said he and his wife spend about
$22,000 a year on rent in the area. They understand that
purchasing a condo would make financial sense — but at this
point in their lives, he added, they would rather enjoy
trips to New York City and Europe instead of bankrolling a
mortgage and home repairs. |
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Greater options for mortgages could eventually sway the
couple's thinking, he said.
"Anything that makes it easier to buy a condo would help, when we are ready
to buy," Garceau said.
The timing of the reforms' roll-out has been complicated because the U.S.
Department of Housing and Urban Development has been working for years on
new FHA guidelines that would give the agency greater flexibility. For
instance, HUD is getting public input on a proposal that would allow
mortgages on buildings with 25 percent to 75 percent renters.
"The range allows FHA to choose a specific percentage that is responsive to
future market changes," said a department spokesman.
Owen Beitsch, a principal with Orlando-based Real Estate Research
Consultants, said the proposals are generally reasonable but buyers should
still beware.
"As a practical matter, I think each buyer should be knowledgeable about the
mix of owner and non-owner occupied units prior to executing a sales
contract," he said. The reality, he added, is that more affordable units are
likely to be in buildings with a greater share of renters.
Overall, he added, restricting mortgages on condos more than houses "poses
something of an inferential bias against renters, which may be at odds with
housing needs and perhaps local planning goals."
Another HUD proposal would allow spot approvals of mortgages to purchase
specific condos in buildings that were not on the FHA's approved lending
list. Orlando condos that lack FHA approval include 101 Eola, The Sanctuary,
The Vue and Solaire, according the HUD.
Some in the real estate industry say the changes might not go far enough.
The reforms, for instance, would expand the length of time condominium
associations can take to get reapproved to be on the FHA's approved list. In
the past, associations had two years and the new requirements gives them
three years.
Orlando real estate agent Sharon Voss, past president of the Orlando
Regional Realtor Association, said she was part of a national committee
working on the issue and her group had pushed for two additional years so
associations only had to undergo the re-approval process every five years.
The new measures could literally open doors for renters who would like to
start building some equity, said Helene Brotman, a broker for Premiere
Property Group.
"It would open this market for first-time buyers, especially at
[renter-heavy] buildings like The Grande and Paramount," said Brotman, who
rents a condo on the edge of downtown.
But for her? She said she would be unlikely to buy because she gets too good
a deal on her rental condo.
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