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>> Kate: Coming up on @Issue, is it a buyer's market
or a seller's market? National headlines all over claim a housing market recovery,
but what's happening locally? We'll have two experts in our studio next to talk about
the local housing market and what mortgage trends and changes are looking like. Find
out where you stand next on @Issue.
You may have seen national headlines recently reading "Housing market recovering!" or
something of the like. Many national outlets are claiming that after a longtime slump coinciding
with the downturn in the economy that the housing market is finally turning around.
According to Reuters, prices for new homes have risen every month since February of last
year enabling us the ability to call the state we're currently in a "recovery." Some
skeptics say we still have a long way to go, however. And one study even thinks Illinois
is currently one of the worst states as far as housing recovery goes based on high delinquency
and foreclosure inventory rates. That study, reported by MSNBC, did mention, however, that
the rate of new mortgages is fairly low when compared with other states, which will have
to be addressed for this state's market to move forward, they say. Mortgage rules, rates
and trends are also playing a role in the ever-changing market. So, where do we stand
locally and what do the local experts think? With me in our studios today to answer those
questions are Doug Stanberry, a realtor with All-American Realty, thanks for joining me
today, and June Hayden, a mortgage lender from First Neighbor Bank down in Greenup.
We appreciate you both for joining me.
>> June: Thank you.
>> Kate: And we are going to start off by jumping right
in with you Doug. Is it a buyers market or a seller's market from your perspective?
>> Doug: I am going to answer that question with, it
depends. It depends on the house, quite frankly. I would say that overall, it's probably more
of a buyers market, but there are some listings that come on the market that have a lot of
interest, and kind of become from the seller's standpoint, a seller's market. We've had some
cases in the last few weeks, where we've had multiple offers on some listings, and they've
sold for maybe at or above the listing price, which is really unusual.
>> Kate: I was going to say, that's something unique
for this area, right? You don't hear about bidding wars, per se.
>> Doug: It is. It is. In fact, when I look at last
year, compared to this year, as far as that situation goes, there were a few properties
that would have sold for list price, generally speaking, no, it doesn't happen. and usually
offers do come in under list price. And homes usually sell for that, but again, it just
depends on the property itself. You could have a property that is in very great condition
and a very desirable floor plan, and you could have multiple offers on it. But it's really
more of a rare case, at this point.
>> Kate: Ok, because you know, I'm hearing locally,
and I live here locally, so I am feeling that things are moving quickly around here, or
is that true, are they moving a little faster, or is this about the same pace that we are
always at, maybe we are just kind of have a different perspective?
>> Doug: Yeah, I think we are pretty much normal, I
mean, as far as time on the market for this time of the year. The trend seems to be to
me in the last I don't know, maybe since 2001, maybe since 9/11, we seem to in Charleston,
anyways, we seem to have more of a seasonal market. Our market is generally more like
maybe mid to latter part of March through probably July sometimes even August is going
to be a little bit late because most people want to be in place by the time school starts,
and we just tend to see more activity in this time period of the year. I mean, we do sell
homes every month of the year, but we definitely see more activity in the first half of the
year.
>> Kate: Ok, and June, you are shaking your head, does
that kind of coincide with what you see in the Mortgage lending trend as well. Yes, it
absolutely does. That time period that Doug referenced is a busier time for us as far
as Mortgage applications and mortgage closings as well.
>> Kate: And so, you know, first of all, I'd like you
both to tell me looking back a little historically, because obviously there was that big downturn
in the economy, so since then, what have been the trends in each of your areas. Maybe we'll
start with June, and you can talk about Mortgage lending trends, you know, how we got into
that slump, where it is going, that kind of thing, from your perspective.
>> June: Ok, I don't want to say a lot about how we
got into that slump, I think we've probably all have some ideas about that, but as far
as where it is leading us now, we are seeing definitely stricter underwriting standards,
and I might mention that I know this is something that I've talked to a lot of people about,
our bank as well as a lot of other banks in the area, I am sure, are able to offer sometimes
more flexibility than can be obtained from the secondary market. But we are definitely
seeing stricter underwriting standards, we are also seeing more compliance issues, more
disclosure that needs to be given to the borrower, so those are a couple things that come to
my mind initially.
>> Kate: Ok, and with those stricter guidelines and
things like that, Doug, are you seeing with that as people trying to buy homes, any problems,
or is just another step to take?
>> Doug: I don't think it's a real big issue with the
buyer trying to buy a home. I think the disclosure I think June is probably talking about like
things like closing costs, and you know, we have our own types of disclosures on the property
itself, and it could be that the underwriters are probably a little more strict as far as
anything that is on that disclosure that could be a red flag to that underwriter, that could
become an issue, but I don't really see that as a big problem.
>> Kate: Ok. So, it's not stopping people from going
out and buying homes.
>> Doug: No, I don't think so, no.
>> Kate: Ok. So really what does that bubble down to,
to the borrower? Is it just a couple extra steps in paperwork, is it harder to get a
loan, I guess is what I am asking?
>> June: Definitely more paperwork required. As far
as harder to get a loan, I would say not for most borrowers. Where we are seeing some of
the stricter underwriting standards, are in debt ratios, there was a time before the bubble
burst, when Freddy Mac would accept debt ratios as high as sometimes seventy to eighty percent
of total gross income going to payments which in my opinion is pretty high, anyway.
>> Kate: I mean, that sounds high.
>> June: So, now we are getting down to they still
will normally accept around fifty percent, so it's a little stricter, but still not eliminating
most borrowers.
>> Kate: And that's done, that pulled back in to protect
the borrower, right?
>> June: Absolutely. Yes.
>> Kate: Ok. That's what would make sense to me anyway,
you know. So, would you say that from your perspectives, we are in recovery then? I mean,
is this a housing recovery, or is this just a trend, or that's a hard question to answer,
isn't it?
>> Doug: It is. My opinion based on my years of experience
here, I've been a realtor here for thirty years, it seems that our local market lags
the national market about a year. It just seems when I look back over the cycles of
the housing market, it seems like whatever we hear on the national news as far as the
national averages, we tend to lag I would say about a year or so. What I'm seeing now
is I am seeing maybe an increase in foreclosures. I am seeing more foreclosures now than we
saw in the last two years, which again is a lag, because I think nationwide we are not
seeing that as much, and this could be an Illinois phenomenon too, because I know we
are pretty low on the list.
>> Kate: And like I mentioned on that introduction,
the study that said we are kind of at the bottom of
>> Doug: We are, I know as of like a year or so ago,
I saw statistics where Illinois is in the bottom five, as far as foreclosures. So, but
I know on a local, from a local standpoint, I am definitely seeing more homes that are
coming on the market as a repossessed properties, and those properties have probably been in
a legal transitional period in the foreclosure process for probably a year, sometimes two
or even three years, so by the time they actually hit the market, but I'm seeing kind of an
increase in that inventory, of those homes coming on the market. So, we really didn't
have a huge bubble here, like you hear about in Phoenix, and in Las Vegas, and Chicago,
and Miami, we didn't have that much of a huge increase in values, and then a crash. Our
market is just more stable, but we, quite honestly, we are listing some properties at
less than what people paid for them in like the last five years. You know, just based
on comparable sales. So,
>> Kate: Yeah, that's interesting to me to mention
the lag, because that seem like not even just in home buying, but in everything, as far
as everything, clothing trends, anything it seems like this part of Illinois, or maybe
even just Illinois, seems to lag behind in some of the trends sometimes, so that's an
interesting point to bring up there. So, do you see now that there are more pre-qualifiers
getting out there, you need to have that prequalification in hand, and is that something that is far
more necessary than maybe it used to be?
>> Doug: It is vital. It is vital. So, definitely.
Because it is as June said, it is tougher to get a mortgage, so if that buyer, if they
are unwilling to get that preapproval letter, prequalification letter, then that pretty
much tells us that there is a problem, and they probably are not going to qualify for
a mortgage. If they resist our suggestion, you know, to get that preapproval, we know
that there is probably a reason. So, it's very important. And it's especially important
that you have that preapproval letter, that prequalification letter, so that when you
do find the perfect home, you are in a better negotiating position, because you could be
competing against another buyer that has their ducks in a row. So, it's very, very important
that you have your financing pretty much lined up before you even really start seriously
looking at homes.
>> Kate: And is that something that you recognize as
well?
>> June: I would say one of the first things to do
before you start shopping for a home, is to come in and see your banker, and make application,
and obtain that pre-approval, or that pre-qualification letter.
>> Kate: Right, because it is as simple as you know,
that mortgage lender will give you a letter that says our bank will loan this person up
to this amount of money, or whatever it is, and then you take that and you have that leverage
when you are buying a home. Ok, so that's good to know. And is that a simple process
for people that aren't familiar with it, if you need to go in and get prequalified?
>> June: Absolutely, it is. These days, you can probably
even go on line and make application as well, or you can come in to one of your local banks,
and make application, and the applications are not difficult, but help is always available
too, if there are any questions. You had mentioned earlier, or asked if there were things that
would speed up the process, and one thing that I would suggest to people when they are
coming in to the bank to make application is to bring a month's worth of paystubs with
you, bring your last year's W-2's because those are pretty important pieces of information,
those will be used to calculate your income, which obviously income is a very important
part of the prequalification process, so if you can bring those or if you are self-employed
individual, bring two years of taxes, income taxes, so those are just a few things that
you can bring with you, to help expedite the process.
>> Kate: ok, and so, are you seeing when people come
in to get mortgages, are you seeing more first time home buyers, are there more people buying
homes for the first time? Are people moving right now? And may that have anything to do
with possible changes in mortgage rates, and things like that?
>> Doug: Well, I would have to say, I don't really
see any trend as far as more first time home buyers, or I really can't say that I see any
kind of a trend, now, I don't, I mean, people are motivated by all kinds of reasons. You
know, a job change, or unfortunately, you know, people passing away, people getting
a divorce, there are a lot of reasons for people to put their homes on the market,
>> Kate: A lot of variables
>> Doug: Right, that creates our inventory. And the
same way you know when you have people wanting to buy a home. I mean, they are motivated
by different reasons. I would say that what is surprising to me, is that with the interest
rates at such historically low rates, that we are not seeing more first time home buyers.
>> Kate: Yeah, that was one of my questions, the rates
are so low, that's unusual, you would think that would motivate people to go out and buy,
>> Doug: I guess by the same token, for people to move
up in housing, too. Rather than refinance, you know, go ahead and increase their, you
know, get a larger home, or you know, to into a different property, But we don't see that.
We really don't see people, you know they are not just going to out and buy a new house
just because the rates are low. They really have to have another motivating factor. But
you would think that there would be more people trading around with the rates, but we don't
see that. And I think it's because I think there are several reasons, and one reason
I think a lot of people are just they just have too much debt, they have too much debt
the way it is, and they just don't, they are not willing, or they are not sure about their
jobs. You know there is still a great deal of uncertainty in our economy.
>> Kate: Right, so some of that economic downturn,
is still affecting people in that way too.
>> Doug: Absolutely, Absolutely, I don't see, I don't
see a great optimism as far as the economy is concerned you know as far as our local
market, and I think that's pretty much in a lot of state.
>> Kate: Sure, ok, and June, are you seeing a lot of
the same, you know, I know it felt like maybe you can shed some light on this, it felt like
a lot of people ran our and refinanced when the rates went down. Is that something that
did happen? Did you get busy, seeing that?
>> June: Oh, absolutely. And actually, I kind of looked
at some numbers, and last year, about seventy percent of our mortgages were refinances.
>> Kate: Oh, that's a lot.
>> Doug: Much to our dismay,
>> Kate: Right. I am sure
>> June: Sure,
>> Doug: We really don't like to see that. We really
don't like to see people refinance, we really want to see people see that home and go to
something else.
>> Kate: Yeah, that would make sense from the realtor's
standpoint, but from the banking standpoint, I am sure you love to see them in there, no
matter how they are coming.
>> June: Absolutely.
>> Doug: But wouldn't you rather deal with a new purchase
than a refinance?
>> June: Yes, new purchases are always so exciting,
particularly for first time homebuyers. That's one of them most rewarding things, that happens
in my job is to be able to accommodate a person buying their first home.
>> Kate: Ok, and so do you think because nationally,
I don't know whether this to be true locally or not, or how it will affect us locally,
but you know they are projecting that the rates will start to creep back up, and I know
they are already starting to creep just a little, you know, not even a noticeable amount,
but do you think, you know, that will show in refinances and things, do you think that
trend will slow down, thanks to the rates going back?
>> June: Absolutely. Yes, because so many people who
have the ability and the interest in refinancing and have already done so, so certainly as
rates begin to increase a little, I think we'll definitely see a slow-down.
>> Kate: Umhmm, and are there changes on the horizon
for the mortgage laws, that might affect the way people refinance and you know, get their
first home loans and things like that in the coming years?
>> June: Not so much first time loan, but there are
many changes coming. Most of them are scheduled to take place January of next year. So, right
now in the banking industry, we are gearing up for those changes. The changes will definitely,
of course, have an effect on buyers and borrowers, but they probably will have more of an effect
on we lenders. How we have to do business.
>> Kate: Ok, can you go over some of those changes,
are there some that you would
>> June: Disclosures are changing. Disclosures changed
two or three years ago, and there are more changes coming in the disclosures, and by
disclosures I mean that we are required to disclose to the customer what we intend to
do with their loan, whether we intend to sell their loan, keep it in-house, more importantly
than that probably is the, or more importantly as far as the changes, is the disclosure in
what is called the good faith estimate, that is an estimate of closing costs. There are
more changes coming just in those forms, there are also changes coming as far as verifying
a borrower's ability to repay, and there are going to be more set guidelines, more firm
guidelines, than what were previously prescribed by the government, so,
>> Kate: This is all for protection of both entities,
right?
>> June: Well, yes, and particularly consumer protection,
there's a big push for that now. More documentation is required, and verification of that documentation.
>> Kate: So, it's not getting simpler?
>> June: No, not for anybody.
>> Kate: Ok, and Doug, do you see that effecting the
real estate market at all, as those changes come and get a little more stringent every
year, is that doing any affect on your work?
>> Doug: I really don't think it is. I don't think
so, I think
>> Kate: It is, what it is, and
>> Doug: Yeah, and I think they have got to get the
loan, so what they have to go through to get the loan, I really don't see that as an impediment
as far as people buying, they just have to jump through those hoops, and as June said,
really, a lot of these rules are designed to protect the consumer, and I think to a
lot of extent they are kind of the way things used to be, before the regulations were so
relaxed back in like 2005, 2006,
>> Kate: Yeah, because '07 is when it got really bad.
>> Doug: Exactly. Because I can remember back years
ago, when people would make a loan application, everything on that application had to be verified,
and they got away from that, people could go online, and get an approval in five minutes,
and nothing was really verified, so,
>> June: And then low-dock or no-dock loans,
>> Kate: Ok, yeah those were history. You know, that's
kind of the next thing I was going to ask. Are there programs, or types of loans and
things that are now obsolete, thanks to these changes.
>> June: Yes, and one particular program that comes
to mind for me is and we do, in our particular bank we deal a lot with Freddy Mac loan, and
Freddy Mac used to have a program called streamlined refinance and that is out the door now. That
particular program was a very dock program, a borrower who had an existing loan, and had
a good repayment history, was not required, we were not required to obtain a new appraisal,
and we had to obtain a credit report, but we really didn't have to worry about what
was on the report as long as that borrower had made his or her house payment. Well, again,
that is history, now when a borrower comes to refinance, they are going to have to go
through the same procedure as if they were a new customer.
>> Kate: Ok, so that is definitely changing. You know,
we do a lot here with the rural development loan program, too. Is that something that
is going to be changing?
>> June: Other than the general changes which will
affect everyone, I am not aware of in particular of rural development itself changing, now
Doug, there may be some changes affecting Charleston specifically, as far as property
eligibility.
>> Doug: Yes,
>> Kate: Are you seeing things coming down the pipe
with that?
>> Doug: Well, yes, unfortunately, we are told that
the rural development program will not be available to properties in Charleston after
April, I believe April, the end of April perhaps.
>> June: The date that I was given was the bank must
have a conditional commitment from Rural Development by March 27.
>> Doug: Ok.
>> June: That would be the commitment; the loan could
close after that,
>> Doug: Correct.
>> Kate: That's coming up fast, then.
>> Doug: It is, and quite frankly that will affect
our business.
>> Kate: Yeah, I was going to say, what does that do?
>> Doug: We don't know. Hopefully it will not affect
the number of homes that we are selling, but it is going to change the cost for the buyer.
Because what some of the banks are recommending as a replacement for RD&R in Charleston Market
would be an FHA mortgage,
>> Kate: Ok.
>> Doug: And with an FHA mortgage, and June, if I am
wrong, correct me. But there's a minimum three percent down payment and a new rule with FHA
is formerly you had to escrow real estate tax and Insurance with FHA until you had twenty
percent equity in the property. Well, I heard that that is going to change, where you are
going to have to carry the, I correct myself; it's not the escrow, well part of the escrow
too, but the mortgage insurance.
>> June; Mortgage Insurance, you have to carry mortgage
insurance
>> Doug: You have to carry that and that will be for
the life of the loan. After I think coming up here before too long.
>> June: I am not certain of the date of that,
>> Doug: Yeah, so that's just added cost to the consumer.
>> Kate: It's going to change the way you know, some
people shop I am sure, because they may have to wait until they have a certain amount of
money to put into that now.
>> Doug: Correct. Correct. Or it will change the amount
of home that they can qualify for.
>> Kate: Absolutely.
>> June: And one thing I had noted in addressing the
changes in borrowing trends, was that we are, I am seeing, at least from my perspective,
more borrowers who are not able to get together that required three percent. So we were looking
at for home purchase loans, a lot of the rural development or the 100 percent financing,
so I can certainly see how that will affect.
>> Kate: Yeah, that was something that came to mind
too.
>> Doug: Yeah, it was a wonderful program, and we are
really going to miss it, and from what we are being told, the reason that Charleston
won't qualify is because of the population, that the government is counting the student
population as the total and so that will bump us above the maximum population. Greenup,
Casey, even Mattoon, will still be, people will still be able to buy homes in those communities
with the RD program, but not Charleston. So, that's we sell a lot of homes that are financed
through rural development.
>> Kate: You know, that was something else that came
up when you are talking about one hundred percent financing, do you see a lot more of
that, because if people are having higher debt ratios, you know, are they having to
take one hundred percent loans instead of putting money down, because I know in the
past, it was almost you know maybe twenty years ago or so, twenty percent down, that's
jut what it was, you put twenty percent down down, and you didn't buy until you had that
and you know, are there a lot more one hundred percent loans now?
>> June: Definitely. We are seeing a lot more one hundred
percent loans and then also there are those borrowers who do not have to borrow one hundred
percent but they are going for the maybe ninety or ninety-five percent with the private mortgage
insurance enhancements. So, definitely we are seeing really and truly, very few borrowers
having the twenty percent cash.
>> Kate: Right, well, I imagine you know, in today's
society, it's kind of hard to gather up, especially depending on you know the amount of home you
might want to buy, It's going to be hard to raise that kind of money.
>> June: Right, and with prices increasing, and they
have been increasing over the past several years, so definitely.
>> Kate: Are you seeing that too, you know, the home
prices do increase around here?
>> Doug: You know what, I would have to say in the
last few years, we are really not seeing a big increase in homes; they are pretty stable,
I would say. You know, some homes have lost value, if people do not take care of them,
andif the don't maintain them properly, they will lose value, but we are seeing property
values, you know, fairly stable but not really increasing a lot, but not losing a lot of
value, like I said, unless, I mean there are a lot of factors that can work into what a
property's value is. If it is priced too high originally, that can really hurt the ultimate
sales price of it, like I said the condition, the condition is very important, homes that
are not maintained lose value almost exponentially, because buyers walk in, and they see work
they need to do and they will, you know it may cost them $5,000 to bring the house up
to their standards, and they'll come in a ten or fifteen thousand under list price,
>> Kate: Because they see that as money they are going
to have to spend, Ok
>> Doug: They do.
>> June: All right, Doug, I might mention when I talked
about prices increasing I was talking about several, from several years back not in the
last few, because we, no, we are not seeing an increase, in fact, another thing that can
become a problem for us, and for our borrowers who are wanting to refinance, is that sometimes
when they come to us to do their refinance loan, which now, remember does require a new
appraisal, even if it's only a rate and term refi, those appraisals are unfortunately coming
back lower than you know, what the appraisal was a few years ago, when the borrower took
the original loan, So no, we are definitely are not seeing an increase in housing prices
at this particular time.
>> Kate: And I know people are always concerned about
those appraisals, you know, because that depends on the amount of the loan, and things like
that, so you know, kind of as we close up here, what's some quick tips that you would
have while we navigate this kind of changing market here? From both of your perspectives?
>> Doug: I would have to say, save your money.
>> June: Absolutely!
>> Doug: Save your money.
>> Kate: Of course, the banker is going to say that
too, you know.
>> Doug: So that you can qualify for the mortgage.
So you are going to save your money, so that you can see June, and get the approved mortgage,
and you can see me. So, yeah, definitely, you've got to have money saved, you've got
to have your credit, your credit scores have been increased as far as to finance for a
property. And I would also say to and this is a trend that I have noticed, that we are
in a period of such an incredibly low interest rates, that even though we are so low as far
as interest rates, new people, young buyers, first time home buyers who are getting into
the market, to them that is kind of a bench mark. So, if they see rates go to five percent
they think the rates are really high. And I, when I got in the real estate business,
back in the early 80's the interest rates were twelve percent.
>> June: Double digits, umhmm.
>> Doug: And they had been eighteen and twenty percent
before that. So I can remember when they first came below ten percent in my career, it was
like Hallelujah! Rates are finally getting below 10, but so now, like I said, with first
time home buyers or people that are in the market for the first time, now, you know,
they watch those rates, and if the rates go up a quarter of a percent, they think it's
like the end of the world, so it's really interesting the perspective they are coming
from, they really think those rates are really high if they get to five percent, and it's
low.
>> Kate: Well, we are out of time for today, and thank
you both for coming, and it's great conversation, and we appreciate all you out there watching
@ Issue, we'll see you next time.