If you have followed our posts on the Pasadena housing market, then you are well aware that sales of townhomes and condominiums have been lagging behind that of single family residences. As the price of a single family home declines, homebuyers are deciding there is more value in a private residence that offers a 5000 to 7500 sq ft lot, than in abrand new condominium or townhome that offers communal living and usually a minimum of a $300/month homeowner association fee. However, it all depends on the kind of lifestyle and amenities you desire.
Fannie Mae Adds Restrictions
Talk about kicking someone when they are down, Fannie Mae just increased the occupancy requirements on new condo/townhome projects. When you are purchasing a condo/townhome, your lender wants to know how many units in the complex are owner occupied. They perceive a higher number of owner occupied units as less risk of failure, and today everybody is about minimizing risk. If too many units are rentals, they will not make the loan or they will increase the cost and fees to the borrower. The conforming loan limit for high cost area’s is $729,750.
Local Impact in Pasadena
How will this affect the local housing market? Take for example the new complex located and aptly named Lake@Walnut. This project features 111 units and according to the Pasadena MLS a current 2 bedroom and 3 bath unit is for sale at $594,100, which by the way has been reduced $100,000 since it was originally listed for sale last year. If you are a homebuyer and you have had your eye on this property, you may find out that your borrowing costs have gone up unless 70% of these units are sold.
Is Anyone Home at The Dalton?
Take another new project in town. The Dalton featured 55 units located at 238 S. Arroyo Parkway. Actually the new Fannie guidelines may not have time to impact this project. When I looked in the MLS today all of the listings have been cancelled, the phone has been disconnectedand the calls I made only referred me to someone else who couldn’t tell me anything about the status. The music is still playing on their website, but one has to wonder if it is a funeral march?
Lower interest rates have been receiving a lot of news lately, however what is missing from the reports, is the cost to acquire the money is going up. Fannie expects to raise borrowing costs on condo and townhome’s by 0.75% if buyers aren’t coming in with at least a 25% down payment. If you are making a loan application make sure you look at the total cost of the loan, not just the interest rate. A low interest rate may have higher upfront fees and a higher overall cost. Ask for a Good Faith Estimate which will include the total cost of your loan.