Area home prices have dropped 20 to 30 percent from their peak and continue to decline at about 1 percent every month, according to a sobering assessment with a silver lining offered Thursday to the Rim Country Regional Chamber of Commerce.
More than 450 homes are now listed for sale in the area, about double last year’s supply. Each month the supply of houses on the market grows, with 10 to 20 sales and 30 to 40 new listings, said Realtors in attendance.
Some Realtors said they have to list a house at 50 percent less than the peak value about two years ago to draw in buyers.
However, while the swoon in home values has hit homeowners — the trend also offers a “historic” moment to buy a home cheaply, said National Bank of Arizona Vice President Julie Ruttle.
The impact on the region’s once non-existent supply of “affordable” houses remains the one silver lining in the real estate meltdown, said the speakers.
Interest rates below 5 percent and a host of low-cost government mortgage programs have opened the door for homeowners to refinance and for newcomers to get into the market.
Federally backed loans from the Department of Veterans Affairs, Freddie Mac, Fannie Mae and even the federal Department of Agriculture now provide buyers with low rates and minimal down payments and closing costs — sometimes based on income. That includes a new federal program that gives qualified first-time homebuyers an $8,000 tax credit on their down payment.
“There are opportunities to buy and banks are actually lending,” Ruttle told about 40 community leaders, Realtors, business owners and financial experts at the monthly Business Buzz luncheon, held Thursday in the offices of the Central Arizona Board of Realtors.
Ruttle said that buyers with steady jobs, good credit and a 10 to 20 percent down payment can still easily and quickly qualify for a loan and enjoy the lowest interest rates in decades. She said the bank continues to fund second home, raw land and construction loans, although lenders often now require a 25 percent down payment for such loans.
“It’s not only about responsible lending —its about affordable housing,” she said, working to counter the public perception that banks have simply stopped loaning money.
Two years ago, the average Payson home for sale cost about twice what the average worker could afford. That made it hard for schools, the town and local businesses to lure workers, who found they couldn’t afford a house or find an apartment.
Now, many of the 450 homes on the market cost less than $200,000, with some below $100,000 — an almost non-existent category two years ago.
Ruttle noted that despite a growing backlog of homes on the market locally, “houses are still moving and while there are some foreclosures and short sales, they’re not driving the market like they are in the Valley.”
However, she said the freewheeling loans that helped send the housing market into a feverish delirium and a one-year 50 percent jump in prices in about 2005 have vanished.
“The credit rating didn’t matter, bankruptcy didn’t matter, a 120 percent (of appraised value) loan — it didn’t matter. We didn’t really care, we just pumped out the loans,” said Ruttle.
She noted that at the height of the loan frenzy, lenders often didn’t confirm incomes for self-employed people and would sometimes make loans that exceeded appraised values for three or four houses to a single buyer. Moreover, appraisers often came under pressure to come up with value estimates that would support a particular sale, rather than providing independent estimates.
All that has changed in the new, sobered lending market — essentially raising the bar back to where it was before the frenzy.
Now, self-employed workers have to provide evidence of income going back at least two years — and often also have to come up with a sizeable down payment. And anyone seeking a loan for raw land or a second home generally must come up with 20 or 25 percent down.
In addition, changes in the rules for appraisers that take effect in May will bar financial relationships between the appraiser and the buyer, seller or real estate agent. The new rules also strictly limit the amount of information about a pending deal that can be supplied to the independent appraiser who estimates the value of the property.
The Realtor-dominated audience peppered Ruttle with questions about the new restrictions on loans and on the bewilderment of new government-supported lending programs to reduce interest rates, closing costs and down payments for low-income buyers, veterans and other qualified homebuyers.
Appraiser Mike Foil said from the audience that even though home prices have dropped more than 20 percent in the past year or two, he continues to discount values by between .6 percent and 1.6 percent each month, based on the neighborhood.
He applies that monthly decline to any comparable sales, on which appraisers normally rely heavily in settling the value of a house.
That appraisal, in turn, sets the limit on how much money the lender will let a buyer borrow.