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Myth-busting: Real estate market misconceptions
Note: This is the first in a series of articles about conditions in our local real estate market. The goal is to dispel rumors and give an accurate view of the market.
Myth No. 1: Banks aren’t lending.
Truth: “It is definitely a myth that banks aren’t lending,” said Michele Adkisson, Branch Manager at Eagle Home Mortgage. “Eagle Home Mortgage’s portfolio of loan products has been increasing in the last few years. This is our most successful year in terms of purchase business, so not only is our market improving, lending is expanding in the right direction. Fortunately, this is not a return to irresponsible lending of the past. I do believe lending will expand further, responsibly, once prices stabilize in our area.”
Truth: When asked the question, “What about the rumors we hear about banks not lending?” my answer is that while it’s true that underwriting guidelines have tightened for the time being, it’s a small price to pay for one of the largest purchases you will make in your lifetime,” said Deon Kapetan, Lending Leader at Sound Community Bank. “I consider the limitations as a way of protecting our future so that we don’t get back into the same meltdown experienced in the markets’ recent past.”
Truth: Teri K. Ward, Vice President, Mortgage Department Manager of First Federal, reports that it is the perfect time for first-time homebuyers.
“Rates are historically low, as are home prices,” Ward said. “There are programs that allow up to 100-percent financing and other programs that require as little as 3.5 percent down. The number of first-time home buyers is actually increasing!”
MarketWatch reported on March 29 that “The 30-year fixed-rate mortgage average fell to 3.99 percent in the week ending March 29 from 4.08 percent in the prior week, Freddie Mac said Thursday in its weekly report. The rate was 4.86 percent a year earlier.”
Myth No. 2: It’s impossible to qualify for a loan today.
Truth: “Lending guidelines have not changed much for lenders who have always required basic documentation of a stable income,” Ward said. What have been eliminated are stated-income loans without verification of the actual income earned by the loan applicants.
Truth: “You can get a loan if you have full-time employment and decent credit,” said Arthur Buhrer, Senior Loan Officer at Clift Mortgage. “Not impossible, only more difficult. You can get a home loan; however, everyone is doing the due diligence, that was absent pre-2008, to make sure that folks can afford the home payment.”
Myth No. 3: You can’t get a land or construction loan.
Truth: Lenders on the North Olympic Peninsula are making land loans for the purchase of residential lots and construction loans for custom homes in greater numbers than they have since 2009. Kapetan said, “When asked if I’ve seen some favorable trends in the real estate market, the answer is ‘Yes.’ Here at Sound Community Bank, we’ve recently seen more requests and inquiries for lot and construction loans than in the past couple of years. As the land sales prices have lowered, it’s has become more feasible to build that dream home with as little as 20 percent down. We’ve also seen more first-time homebuyers enter the market. With rates and prices lower than ever, the word is getting out that in some cases, owning a home costs less than renting.”
In fact, Nell Clausen with Estes Builders reports that “Of the custom construction homes we have now under contract or will start in the next six months, half are mortgaged with local lenders.”
Myth No. 4: There are no loans for second homes or rental properties.
People who have enjoyed visiting the North Olympic Peninsula on vacations would like to buy a vacation home here but are concerned that lenders may make it difficult to finance a second home.
Truth: “Whether buying a second home, vacation home or rental property, the requirements are the same — you must qualify with the same debt-to-income requirements. I have handled loans for all these types of purchases within the last few months,” said Al Kruebbe, President at Peninsula Mortgage.
Truth: “Loans are readily available for the purchase of a vacation home for both site-built and manufactured homes. The peninsula is an ideal location for a vacation home and this has become a growing segment of the acquisition market in our market area of Clallam County,” said Ward. Some buyers are purchasing with the long-term plan of living in the vacation home after their retirement.
Myth No. 5: There is no affordable housing available.
Truth: The National Association of Realtors reported in March that housing affordability conditions have reached the highest level since record-keeping began in 1970. NAR’s Housing Affordability Index rose to a record high of 206.1 in January, based on the relationship between median home price, median family income and average mortgage interest rate; the higher the index, the greater the household purchasing power. A rating of 200 indicates the typical family has roughly double the income needed to purchase a median-priced home.
Truth: Lower prices mean more affordable. “The amount of short sales and foreclosed homes have been a major contributor to the declining home values,” Ward said. “An appraisal is based on one primary thing: What were the prices of similar homes in the area that have recently sold?”