Master,
Down here the FHA loans requiring just 3.5% down are very hard to get. The real estate agents and brokers I'm in contact with are mostly doing Fannie and Freddie, when they can get anything done at all.
I suspect that the huge overbuilding here in places like Rancho Cucamonga, Fontana, Moreno Valley, Riverside, etc. all the way up to Bakersfield/Temecula and then onto Modesto and Sacramento may make things a bit different outside of the Bay Area, where I presume that you are.
I agree with you that the FHA loans may become a problem, especially if we go into a double-dip type recession or if the recovery is very anemic and does not generate job growth.
If the banks think that the empty homes are going to increase in value over the next year or even the next few years in Southern California, then I think they're delusional.
What is actually starting to happen down here, especially in the Moreno Valley is that investors are buying up the homes for cash, usually for $60-80,000 and then renting them out for $1200-1500/month. It doesn't help home values, of course, but it does put occupants in the empty houses. (I can't imagine anything like this happening in your neck of the woods, because home values are so much higher up there.)
Bladerunner
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