When I joined the Temecula Valley on a personal-level & the mortgage business in 1993, the condominium market here was a very different animal.
I remember only one or two condo complexes in Temecula, a couple in Murrieta, and very little condominium development in Menifee and the surrounding communities.
Then everything changed.
The 1990s: The Valley Explodes
The completion of Interstate 15 through the Temecula Valley in 1985 helped trigger tremendous population growth. The City of Temecula notes that its population reached approximately 27,099 by 1990, as people from San Diego, Orange County and other Southern California communities discovered relatively affordable housing in the Valley.
Murrieta experienced a similar explosion. The City of Murrieta reports that the community grew from roughly 2,200 residents in 1980 to more than 24,000 by 1990, eventually exceeding 85,000 residents by 2005. And this doesn’t even include the unincorporated parts either.
More people meant more housing.
During the 1990s and especially into the 2000s, condominium construction became a much larger part of the housing landscape. Especially in the 2000’s boom.
The Condo Financing Problem
Here was one of the challenges I watched develop.
New condominium projects were often being sold at prices that exceeded the applicable FHA, VA and Conventional loan limits of the time.
That created an interesting problem.
Why spend the time and money getting a condominium project approved for FHA or VA financing when a large percentage of buyers couldn’t use those programs anyway?
As a result, there were periods when only a handful of local complexes were FHA- or VA-approved.
Then came 2008 and 2009.
Home prices and property values dropped dramatically. Suddenly, many condominium projects that had previously been above FHA, VA or Conventional Loan Limits were within financing range.
But there was still a problem: many projects weren’t approved.
For many complexes, the paperwork and project approvals took years to catch up. From approximately 2008 through 2015, I watched more condominium projects work through the documentation and approval process.
2015 to Today
Since approximately 2015, condominium development has continued throughout the Temecula Valley and surrounding Inland Empire at a much faster pace.
Why?
My opinion is that several factors are contributing:
- Choice residential land is becoming harder to find.
- Land costs continue to influence development economics.
- Local zoning and density requirements matter.
- Cities and governing agencies want additional entry-level housing choices.
- Developers can create more housing units on a given parcel through higher-density development.
Menifee is a great example of the continuing growth story. The city incorporated in 2008, and the City of Menifee identifies Menifee Lakes, which began its major growth in 1989, as an early master-planned community.
Why Isn’t Every Condo FHA or VA Approved?
There can be several reasons:
- Financial issues within the HOA or project
- Current or pending litigation
- Insurance, reserve, or structural concerns
- The HOA or management company simply hasn’t been proactive about approval
FHA specifically considers factors such as the project’s financial condition, insurance, pending legal action and physical condition when reviewing a condominium project. FHA also allows certain units in non-approved projects to qualify through its Single-Unit Approval process or an FHA Spot-Approval.
HUD FHA Condominium Resources & FHA Condo Lookup
VA is different: a condominium must be in a VA-approved project for VA financing.
VA Condo Approval Information for Lenders
And don’t forget Conventional financing. Fannie Mae and Freddie Mac have their own condominium project eligibility and review requirements.
Fannie Mae — Condo Project Standards
Freddie Mac — Condominium Unit Mortgages
My Opinion: Get Your Condo Approved!
If an HOA has not pursued FHA, VA or Conventional eligibility, I believe it can hurt the homeowners and the marketability of the entire project.
More financing options generally mean more potential buyers.
If you own a condo, lean on your HOA and management company. Ask questions. Encourage them to get the project approved. This can be done at the homeowner HOA Board Meetings, most have a Q&A at the beginning or end of the meeting.
Before buying a Temecula Valley Condominium, do your homework. Talk to friends and neighbors, work with experienced professionals, and communicate with the HOA as much as possible.
The condo may look perfect—but the project itself is part of the transaction.
