It should be the best of times to invest in rental properties. There are a huge number of undervalued properties on the market, and more foreclosures waiting in the wings. The demand for rental properties is growing fast as fewer people can afford to buy, and even affluent buyers sit on the sidelines waiting for the market to stabilize. And in Northern Virginia – where the unemployment rate dropped in May – the picture is bright.
But tight credit is making it difficult for investors to purchase rental properties.
New investments in rental properties benefit the real estate market by lowering the number of foreclosed properties, providing much needed rentals, and helping to stabilize the housing market. Knowing this, you would think that the government would be developing plans to support real estate investors and loosen credit. Instead, proposed government regulations – 367 pages of them – aimed at preventing the excesses that caused the 2008 housing collapse and reinvigorating the housing market, may actually have the opposite effect.
By raising the down payment to 20%, the new exemption for “Qualified Residential Mortgages”, being proposed by six federal regulators, could sideline many creditworthy buyers and further depress the struggling housing market.
(See: John W. Schoen, Proposed rules could shut many out of housing market, msnbc.com 6/10/11)
How will this affect commercial and multifamily real estate transactions? According to the Mortgage Bankers Association, the tighter rules on QRMs will affect the flow of capital back into these markets. And that means tighter credit.
Happily opponents aren’t going down without a fight. Thanks to the efforts of a coalition led by the MBA, the government agencies backing QRM have agreed to extend the deadline for commenting on the proposed exemption to August 1.
Stay tuned.
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