Some signs of life in housing, credit drought goes on

The housing market in the Augusta, GA area remains relatively strong in comparison to other parts of the country, but it's not necessisarily an easy process. Here’s an interesting article from Reuters regarding the effects of the tightening of credit. It’s not impossible to obtain a mortgage these days, but expect the process to be detailed. You may feel as if you have been through an IRS audit or head-to-toe medical exam.

http://www.reuters.com/article/2011/04/25/us-usa-housing-market-idUSTRE73O0YF20110425

By Nick Carey
CHICAGO Mon Apr 25, 2011


(Reuters) - Like an increasing number of well-heeled Americans, the Hodgsons decided it was time to buy a new home, even if most of the U.S. housing market remains in the dumps.

After years in an apartment building, "we were just tired of sharing space with other people," says Cari Hodgson, 32. "It was time to have space of our own."

She and her commodities trader husband sold the condo and recently bought a $1.2 million, five-bedroom home in Chicago's north side, sealing the deal with the kind of big down-payment that is heating up the high-end of the U.S. property market.

Cari, a part-time nurse, declined to say how much of their own money the couple put into the house. But she did say the mortgage was less than a so-called jumbo loan, which are bigger than most U.S. mortgages and currently start at $730,000.

That means the Hodgsons put down at least 40 percent of the house's value, a chunk far out of reach for most Americans.

"We were told by a number of people that it was very difficult to qualify for a jumbo loan," Cari Hodgson said. "So we didn't even try to get one."

Four years after U.S. housing prices began to nose-dive, eventually triggering a global financial crisis, signs of life are appearing at the top and the bottom ends of the market.

By contrast, a sustained recovery remains far off for the vast middle ground of the U.S. housing sector.

Affluent Americans are feeling more secure as the impact of the recession fades and the stock market racks up big gains.

"People who have decent income are saying, maybe I can trade up, buy a better property," said Bill Hardin, director of the real estate program at Florida International University.

"Some people are even saying, I'm willing to take a loss on the property I'm selling now to get something I couldn't buy during the housing peak."

Sales of homes worth over $1 million, which account for about 1.5 percent of total U.S. sales, have risen in most states so far in 2011.

Realtors, brokers and others in the housing industry report the first bidding wars for expensive homes since the crash.

"There is a surge of confidence among high-end buyers and we're unfortunately short on inventory," said Pamela Liebman, chief executive of New York property firm The Corcoran Group.

Her firm saw a doubling in the sale of luxury co-ops, worth more than $10 million, in the first three months of 2011.

At the bottom end, homes are also on the move as investors pay cash for foreclosed properties to rent them out.

It's a different story in the middle of the market.

Properties worth between $100,000 and $500,000 make up more than 60 percent of U.S. housing. Sales in that category in March were down across every region of America from the same month a year earlier, when tax breaks were propping up demand.

Foreclosures and short sales -- whereby struggling homeowners sell their homes for below what they owe, with the consent of their lenders -- are still a big drag. Credit remains tight and middle-income families are more pessimistic than their wealthier compatriots about the economy.

So this year's Spring selling season, when buyers typically start to look for a home after winter, has mostly been a dud.

Access to credit is cited as a broad problem. While the rich can simply put more money down, for most would-be buyers the need for more 'skin in the game' is a deal-breaker.

Realtors and brokers complain that the credit drought is as extreme as the flood of loose lending
of the boom years.

"The pendulum has swung from too far to the left to too far to the right," Corcoran's Liebman said. "We need to find some balance in lending."

"IT'S HARD TO BE POSITIVE"

On a recent sunny Sunday afternoon, in Leawood, near Kansas City, realtor Ted DeVore patiently waited inside an elegant ranch home priced at $344,900, eager to point out the lush backyard, new roof, remodeled kitchen and updated bathrooms.

But most of the visitors to the open house were curious neighbors, not would-be buyers.
Middle-income Americans in Middle America are not yet ready to get back into the market. Homes that do sell in the Kansas City area are often going for between 20 percent to 30 percent below the listed price.

"There are so many people questioning things right now, asking themselves, am I going to have my job in six months?" DeVore said, affable but seemingly resigned to a slow Spring. "The indicators are very mixed for the whole economy and the real estate market very closely follows the overall economy."

"It's hard to be positive," he added.