Insiders stress positive aspects of local housing market
In weather terms, there are tropical storms buffeting housing markets along the coasts, and foreclosures raining down on the Steel Belt states. But that doesn’t mean thunderclouds are forming above the local market, according to Carol Van Gorp, chief executive officer of the Columbia Board of Realtors.
Real estate is “a lot like the weather,” Van Gorp said. “There is no national forecast.”
More than 50 people turned out for a meeting at the Board of Realtors conference room Sept. 23 to hear from a panel of bankers and real estate brokers on the condition of the real estate market in Columbia.
Van Gorp said she put the panel together to put a local perspective on the dire national news about the housing crisis and to talk about the implications of the planned federal bailout of the financial industry.
“Things are not so gloomy here,” Van Gorp told the group. “We’ve got some very positive things going on in our market, and the numbers are indicating it.”
Although unit sales are down for the year, median and average prices continue to increase, Van Gorp said.
The median price for a new single-family home in September 2008 was $196,850 up by 6.61 percent, or $12,200, over the same month in 2007, according to Board of Realtors statistics. The average price was $229,809, a rise of about $11,737, or 5.61 percent.
Existing home sales were up as well, with a median price of $148,500 up 1 percent, or $1,500, and an average price of $170,583, a jump of 7 percent, or $3,340.
And although there are fewer permits being pulled for new construction – 188 permits pulled as of August verses 300 the previous year – the city’s inventory of new homes continues to drop, she said.
Van Gorp also cited a recent study of Columbia home sellers that showed only 2 percent were selling their homes for economic reasons. Twenty-nine percent sold because of a job move or relocation, while 16 percent wanted larger home and 10 percent wanted a smaller home.
On the panel were Hawthorn Bank President Matt Williams; Andrew Beverley, CEO and president of First National Bank; Mary Wilkerson, vice-president of marketing for Boone County National Bank; Rob Wolverton, president of R. Anthony Development; and Chris Sanders, vice-president of Allied Mortgage.
Panelists stressed that the banking industry is getting back to the fundamentals of good lending practices, many of which were ignored by some of the bigger banks in the past few years.
The changes taking place because of the mortgage crisis are affecting all lending platforms, Sanders said, but it’s back to basics and common sense underwriting practices.
“Not everybody’s going to get a loan,” he said. A buyer who had a bankruptcy last week, for instance, is probably not going to get 100 percent financing this week.
Traditional lending standards are back in place and deals that might have gotten done a few years ago might not get done now, panelists said, but that doesn’t mean people can’t get loans.
“We’re making loans every single day, and we’re making loans to lots of different kinds of people,” Wilkerson said. “There’s no question that underwriting standards are different, but there are a lot of programs still out there for people that might not fit into that nice neat little box,” she said. “We’re still putting people into homes, and we’re putting a lot of people into homes.”
Sub-prime mortgages, risky loans that have dominated news coverage of the bailout, were far more prevalent on the coasts. Sanders said there are varying levels of what constitutes a sub-prime loan, but he understood the percentage of sub-prime loans for Columbia properties was less than 5 percent.
Those loans primarily came out of national lending institutions like Bear Stearns, Lehman Brothers or Washington Mutual, he said, and now many of those sub-prime loans are being flipped into other kinds of loans.
Columbia has also so far had a relatively low number of foreclosures (about 200 through August).
“We’re better off than most,” Williams said. “Yes, there are foreclosures, but I don’t see it as a horrible thing that’s a black cloud over us.”
As for how a bailout could potentially affect Columbians, panelists said it was unclear.
“In the short term, nothing’s going to change,” Wilkerson said. “But what’s going to happen with the economy, or with the bailout, or the decisions that are going to be made, or frankly, the regulations that may be put in place, we’ll have to see and adapt.”
The bankers said the problems of Wall Street banks often don’t affect local banks, which do most of their business with people they know, as greatly as is perceived.
“Our basic business is taking in money locally and lending out money locally,” Beverley said.
Regarding home loans, the panelists agreed that 2008 was looking to be a good year.
No drastic changes have come into play for first-time homebuyers, Sanders said. Though a higher credit score may be necessary, and potential buyers may have to attend a homeownership counseling course, many down payment options remain.
But he cautioned that those with bad credit, credit scores less than 580, or prior bankruptcies or foreclosures less than 2 years old, will face more difficulties.
Wolverton said Columbia’s development business is going through the same cycle of correction as the rest of the country, but developers should be able to weather the storm.
“We never saw the real heights of other areas, and we’re not going to see the real lows of other areas,” he said.
He said he believed sales that should have taken place over an extended sales period were crunched into 2005 and 2006.
“I don’t think we lost buyers. I think we moved buyers in those years, which became these gigantic years,” he said. “Unfortunately some of us made decisions that were based on these gigantic years that were not sustainable.”
Still, things aren’t all bad for Columbia developers.
“In our market today, if you present a property well, and price it properly, you’re going to sell it,” Wolverton said.
While sales for the next few years are going to be below the standards set during the boom years, they will go back to the more sustainable numbers that existed before the crunch, he said.
Van Gorp said Columbia is insulated due to market being market of primary residencies where people buy homes they and their families live in, rather than much buying of investment properties.
Having the university and insurance sector has provided good jobs and a good employment rates, she said, though more good jobs are still needed.
Job creation will be vital for Columbia developers, Wolverton said.
“If we don’t have a steady flow and steady growth of jobs, then it’s really, really difficult. The development community is based upon growth, and the very best thing in the world for us as developers is slow steady growth, and we cannot have that without job creation,” he saids