Real estate market feels effect of poor lending practices

The housing market continues to be questionable in many areas of the United States; a survey of Wahkiakum County’s situation real estate business shows a range of opinion.

Broker Kay Cochran of Lower Columbia Realty said that from January 2007 to late October of this year, LCR had 36 residential sales, which was down from 2006. Last year started with a gentle downturn, she said, but it ended as a really productive year in real estate.

“What is happening with the economy right now has affected our entire nation," Cochran said. "This area is not going to be unaffected by that.”

As this is an election year, people are hesitant about major purchases like property or investments, she said. People seem to wait until after the election to see what is going to happen.

The bank crisis this year, piggybacked with the sub-prime lending fiasco, is what is driving the problems in real estate.

“It is very hard to get a loan right now,” Cochran said. People who are looking for a home loan need stellar credit and a sizable down payment.

When the stock market does well, it is rare to see the influx of foreclosures the nation has seen in past months. People are suffering; it is a domino effect. It all comes down to credit.

A credit score of 700-750 will almost guarantee a home loan. That is almost perfect credit. However, even people with outstanding credit card debt are now having problems. They need to be paying those off.

“That’s not good on your record," Cochran said.

Years ago, people were encouraged to obtain credit cards to establish credit, but now banks expect expense and income statements from borrowers.

Lower Columbia Realty Associate Broker Stephanie Prestegard said the interest only loans can be a dangerous road. Those allow the borrower to pay only the interest and not pay anything on the principal loan.

“It allows people to borrow way more than they could,” she said.

Those loans and adjustable rate mortgages have given people a false sense of security. They were able to borrow more against that adjustable rate. When people get those, the rate may be low when they obtain it, but then it goes up and people are unable to make their payments.

Cochran is optimistic that, even though she expects it to take some time, things will turn around after the election. She is hopeful sales will return to a level like they were in 2005 and 2006.

There is a large inventory of homes and land for sale on the multiple listing. The high amount of vacant land available is due to local land owners subdividing their property.

Last year, the median sale price for a home was $220,500. This year, the median price was $212,500. The high sale price in 2007 was $498,000; the low was $80,000. The high this year was $400,000 and the low was $71,500.

Broker Diane Garrett of Windermere Realty said currently there are less vacant land sales than normal, at least for her office.

The properties that have been selling are those that could be considered a prime piece, or a super good buy.

“It’s still a buyers market," she said. "Buyers are making in most cases or many cases very low offers and sometimes getting them; often times getting them.”

Vacant land is harder to get financing for, she said. Some financing is available, but not a lot. There are some companies lending, but at much higher rates and want more down than previously. “I think that’s why our vacant land sales are down.”

When it comes to foreclosures, there aren’t as many in this area as other parts of the nation. Even though she said there have been more homes in foreclosure than usual,

“You don’t see rows of foreclosures down the street. You don’t see that here. You don’t see auctions,” she said, adding her son in Arizona has seen many homes go to auction.

Garrett said she believe the reason we aren’t hurting here as much is because of the buyers that come to the area. There aren’t a lot of first time home buyers coming here. Although there have been some job losses, the area hasn’t seen the massive losses other areas have.

The biggest problem here is the timber crunch. There isn’t the demand there once was. People are holding to their money right now. They are holding off to see what the market will do.

David Nelson, owner and broker at Cathlamet Realty West, said although sales have been slow this year, things have started to bounce back in the past few weeks.

“I don’t know if it’s a flash in the pan, but I’m optimistic,” he said.

The National Association of Realtors is up 5 percent nation wide.

Nelson believes the general public feels things have bottomed out as interest rates are great. “It’s the time to buy,” he said.

A piece of property sitting for some time received several offers recently. This makes Nelson enthused.

He added that Wahkiakum hasn’t suffered like many of the other areas of the nation. The people that have been coming here for a few years are newly retired. Not as many families come because there isn’t any work for them.

It is the general public looking to make purchases, not the sub prime buyers. It is the people with good credit and ready to put 25 percent down who are the serious customers.

“There are a ton of those out there wanting to buy real estate.”

They haven’t made any purchases because they felt they needed to wait. “I think that has stopped.”

Those ready to make that down payment are going to get the loans.

However, he commented, it has been loans going to people who shouldn’t have been getting them that has brought the nation to a standstill. “They were set up for failure; you could see it coming,” he commented.

Nelson, who has been in the business for several years said it was very common years ago to put 20 percent down, then the down payment gradually decreased until it reached zero. Then the interest only loans popped up. Those really set people up for failure.

There is more vacant property available now than this county has ever had, Nelson said. There is a lot of supply of lots for building, but not a lot of demand. There are plenty houses to be found, but many are overpriced, he said; “It scares people away.” A lot is due to tax assessments.

Self described as an eternal optimist, Nelson believes that things are going to get better sooner than later, and the poor lending practices will be cleaned up.

“It’s the heart beat of America; people owning their own home,” Nelson said.