The National Association of Realtors estimated that the Federal Housing Administration's cut in its annual premiums would make home ownership affordable for up to 2.1 million consumers who are currently renting homes and result in up to 240,000 sales of new or existing homes.
"We are optimistic that more affordable FHA loans will have a positive impact on first-time buyers who have been entering the market at a lower than normal rate," NAR President Chris Polychron said in a statement. "Over the past four years, as the fees increased, the percent share of first-time buyers using FHA-backed loans shrank from 56% to 39%," he added.
On Jan. 7, the Obama Administration announced the FHA will cut the annual premium on its mortgage insurance from 1.35% to 0.85%.
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NAR also contested the suggestion that cutting the premium would necessarily leave the FHA dangerously undercapitalized.
"The increase in volume of borrowers acquiring FHA-backed loans will also contribute to the solvency of FHA's Mutual Mortgage Insurance Fund which is already on track to meet the 2% excess reserve amount required by Congress," Polychron said.
Last week, NAFCU joined the Consumer Federation of America in praising the FHA announcement.
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