The NYT brings us yet another lovely story about the FHA’s relentless drive to create a new bubble in housing, by returning to the worst of the pre-bust practices. This story takes place in San Francisco
In January, Mike Rowland was so broke that he had to raid his retirement savings to move here from Boston.
A week ago, he and a couple of buddies bought a two-unit apartment building for nearly a million dollars. They had only a little cash to bring to the table but, with the federal government insuring the transaction, a large down payment was not necessary.
“It was kind of crazy we could get this big a loan,” said Mr. Rowland, 27. “If a government official came out here, I would slap him a high-five.”
The story that the Times is getting at here is not just that the FHA is making bad loans, and it’s not just that the era of no-down payment is back, but that whereas in the past the agency’s mandate was to help the poor, now they’ll help just about anyone.
Old caps on the loans they would insure, basically kept the FHA in states like Texas, notes the times. San Francisco was unheard of. Now the FHA is doing six per week in SF, and expects to do many more.
Anyway, in the long-term this will end badly. We guarantee it. In the meantime, you have to remember that this is yet another asterisk to put on housing stats that already are pretty weak.
(Image is of Jordan Kurland, one of the buyers in the story, via his Facebook)