What Goes Up Must Come Down

No one in the know thought the residential boom would last forever — and neither will today’s home-buying incentives.  The banking debacle and its associated mortgage crisis have had far-reaching effects. While a healthy real estate economy here in Acadiana has left us feeling somewhat protected, we are now beginning to feel the effects of federal government corrections — and interventions.

Ed Boustany, general manager of Home Mortgage Associates, predicted last year’s crash nearly four years ago. I remember him shaking his head saying, “The mortgage lending market can’t keep going like this. There are lenders making 100 percent or 110 percent loans, and pretty much any one can qualify. The market can’t sustain this.”

Boustany was right. If you’re like me and have been involved in real estate for 30 years or more, you remember when interest rates were 16 and 18 percent. You probably also remember the days when the following were required to qualify for a mortgage loan: job, decent credit, and cash for a down payment. It may sound absurd to state the obvious, but thankfully, the craziness in lending is over. Gone are the days when, literally, anyone could get a loan. That’s a good thing, because we all now know where that led.

These changes have spawned some rumors. You may be hearing about how tough it is to get a loan. Not true if you are what my dad used to call “an upstanding citizen.” According to Boustany, “with a solid source of income, a credit score of 680 or above, and between 5 and 10 percent down, you can qualify for today’s rate of 4.75 percent on a 30-year loan.

“Even for jumbo loans — loan amounts over $417,000 — home buyers can purchase discount points and buy the rate down to 5.75,” Boustany explains.

Excellent news if you are in the market for a new home, or even if you are on the fence about that decision, you couldn’t ask for a better time to buy. Are you upgrading? Downsizing? First-time buyer? Each scenario has distinct advantages; it’s a convergence of elements in your favor.

Now for the not-so-good news.

The federal government has assumed the role of “appraisal master” and formed the Home Valuation Code of Conduct, a new layer of government designed to arbitrarily assign an appraiser for every Fannie Mae or Freddie Mac real estate transaction. (The HVCC controls will not apply to FHA or VA purchases.) This process became effective May 1 of this year as a measure to control predatory lending practices in certain markets. The control will be through the use of individual third party appraisal management companies. The AMCs will receive the appraisal order from their client and assign it to an appraiser on their “approved” list.

According to local appraiser Tony Trosclair, “Appraisers can apply to individual AMCs to be included on their approved appraiser list. The AMCs dole out assignments to approved appraisers on their list utilizing different methods; however, it does not take into account the appraiser’s experience, location, or knowledge of a certain market. This means someone from Monroe, La., who has no awareness of or experience in this market, could appraise a home in Lafayette, although highly unlikely an appraiser would accept the assignment.”

As a Realtor, my suggestion to many home sellers is to obtain your own appraisal even before you list your property, when you are not yet subject to the HVCC guidelines. This will help establish and substantiate your position before the process is begun.

So, back to the good news.

First, inventory is high. There are currently 1,929 homes on the market throughout Acadiana; 1,114 of those are in Lafayette Parish.

Second, interest rates are low. Van Eaton & Romero’s CEO, Bill Bacque believes “this is it; they’re not going to get any lower.”

HMA’s Boustany agrees, noting, “Even if rates were to drop another quarter of a point, a homeowner is only going to save approximately $16 a month for every $100,000 in loan value. Yet, we hear people say they want to wait rather than refinance, or wait to purchase a new home in the hopes of even lower rates turning up. Meanwhile, they’re spending hundreds more per month at their old higher rate.”

And a third point: The number of listings out-shadows the numbers of buyers on the market, meaning sellers have to become a bit more negotiable.

Last, if you don’t own a home, or if you have adult children who have yet to become homeowners, now is the time. With the $8,000 federal income tax credit available this year for first-time buyers on properties closed by Nov. 30, 2009, not taking advantage of this opportunity is like leaving money on the table. And it’s not that often Uncle Sam brings money to the table.

So the stars have aligned. There’s plenty of inventory. Great interest rates. Slightly negotiable sellers. And a first-time-buyer tax credit. It’s a once-in-a-lifetime convergence.

Teresa Hamilton of Van Eaton & Romero has been one of Lafayette’s top Realtors for more than two decades. Data is supplied by the Realtor Association of Acadiana’s Multiple Listing Service. Neither the association nor its MLS guarantees or is in any way responsible for its accuracy. Data maintained by the association or its MLS may not reflect all real estate activity in the marketplace.