Financial Crisis Affecting Mountaintop Housing Market

By KIM CARPENTER
Correspondent

Earlier this year, President Bush admitted, “our housing market is experiencing a period of challenge and uncertainty.” That was after over 400,000 families lost their homes to foreclosure in 2007. Now economists are predicting that around two million families will face foreclosure in 2008 and 2009. According to RealtyTrac, there were 4,921 new foreclosures in Pennsylvania in August 2008. That’s an increase of 18 percent from just a month before and a 58 percent increase from the same month last year. Senator Bob Casey has stated “The mortgage crisis is threatening the American Dream for too many Pennsylvanians and our economy is suffering.”

Bob Rundle, one of the principal owners of Coldwell Banker’s Rundle Real Estate Office in Mountaintop, says that although every realty office has had about one or two foreclosure listings, his agency recently received four new foreclosure listings in one day. Nonetheless, he said northeast Pennsylvania is more fortunate than other areas. The prolific use of subprime loans and variable rate loans didn’t run rampant in this area. He also reports that Mountaintop’s housing market didn’t go through the huge increases and devastating crashes that may have occurred in other areas. “Our market never went out of sight. We don’t have the peaks and valleys like other areas. We have rolling hills.”

But the housing market in Mountaintop is facing its challenges. Rundle reports that the local market is down and the marketing time is longer. “Whereas houses might have sold in between 30 to 90 days before the financial crisis, now it’s taking between 150 and 180 days.”

Dave Hourigan, one of the principal owners of Century 21 – Smith Hourigan Group in Mountaintop, agrees. “The average number of days a house stays on the market has doubled from 18 months ago.” Because of this, some people who have had their homes for sale are now converting them to rentals instead. Many of the “For Sale By Owner” (FSBO) sellers are now turning to the real estate agencies to list their homes.

Joe Thomas of Joe Thomas Construction in Mountaintop has definitely seen a change in the housing market as a result of the financial crisis. “The new construction market is extremely quiet. It’s definitely a tougher market. Buyers need to have ‘A’ credit and not even be late on a student loan payment. They also need to have 20% deposit.” Hourigan discusses how during the first 25 of the 33 years he’s been in real estate, buyers had to have a good job and decent credit. Then in the following years, “if you were breathing, you could get credit.” Now he’s noticed the swing back to buyers needing to have the necessary income, good credit and 20% down payments for a traditional mortgage.

Kelly Sherry, owner of Neighborhood Welcome, has also noticed the effects the financial crisis has had on the real estate market in Mountaintop. “The number of people moving into and within Mountaintop has decreased substantially.” Sherry travels around Mountaintop, taking information on local businesses to the homes of new residents. The summer and early fall are usually her busiest times. But this year, the numbers of homes she visited decreased by a third. “I still see a lot of houses for sale, but they seem to be staying on the market longer.”

Despite the increase in marketing time, both Rundle and Hourigan agree the prices of homes in Mountaintop haven’t dropped too dramatically. Rundle reports that on average, the prices have dropped about 10 percent. “Things have changed. Sellers aren’t going to get what they would have gotten in 2006 and 2007.” Hourigan reports that although the high-end home values have come down, the prices for medium and lower priced homes have stayed about the same. To overcome the changes in the market, Rundle encourages sellers to price their homes realistically, offer home warranties and consider offering seller-assist financing, which is becoming more common. Hourigan states that the price reduction in the high-end market makes those houses more attractive buys.

In addition to the market being hard on sellers, it has also been challenging for the real estate agencies. Rundle, who employs around 30 agents, says the current crisis may hurt the smaller companies and those who don’t have reserves built up. He states, “When the market was hot, a lot of people got in as agents. The industry is now losing agents.” He predicts that even more agents will be lost toward the end of the year and into early next year as the agents have to pay their annual dues. In the meantime, Rundle explains that agents in his office are going back to the basics. “Before, everybody was buying and selling. Now, we’re calling the FSBOs, getting our name out there, and asking for business.” Hourigan says his office tried to take a proactive approach and seeing the changes in the economy, tried to be more specific with their marketing in 2008. They continue to be cautious with how they spend their money and with the commitments they are making.

Both Rundle and Hourigan agree that the financial environment and changes in the housing market can present opportunities. It’s a great time for people to buy homes or invest in real estate. There is a lot of inventory and the interest rates are favorable. Realty Times recently listed the mortgage rates as 5.94% for a 30 year fixed mortgage and 5.63% for a 15 year fixed mortgage. Richard Gaylord, president of the National Association of Realtors, states, “Despite all the turmoil in world financial markets, home mortgages are available. Mortgages have been harder to find, and availability and terms vary depending on credit score and location, but…the recently enacted economic stimulus package should help housing by gradually freeing the flow of credit.” Hourigan adds that, as part of the American Housing Rescue and Foreclosure Prevention Act, first-time home buyers who buy between April 2008 and April 2009 may be eligible for a $7,500 tax credit.

And for current homeowners who are at risk of foreclosure, there are options for mortgage assistance. The HOPE for Homeowners program that Bush signed into law this summer will refinance mortgages for borrowers who are having difficulty making their payments but can afford a new loan insured by HUD’s Federal Housing Administration (FHA). In addition, in a recent press release, it was announced that Congressman Paul Kanjorski and Senator Bob Casey are working with the Neighborhood Housing Services (NHS) on a foreclosure reduction campaign to help keep distressed homeowners in Northeastern Pennsylvania in their homes. Kanjorski states, “Far too many families facing the threat of losing their homes to foreclosure are afraid to reach out for help, but housing counselors are available and want to help families to stay in their homes.” Homeowners who are at risk of losing their homes to foreclosure are urged to contact NHS at (570) 558-2490, HOPE NOW at 1-888-995- 4673 or the Pennsylvania Housing Finance Agency at 1-800-822-1174. Kanjorski urges, “The sooner a distressed borrower calls for help, the more likely they are to keep their homes.”

This is part of the October 22, 2008 online edition of The Mountaintop Eagle.

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