Are new rates a draw for buyers?
A home is offered for sale in the West Town community in Chicago, Ill.
TEXT OF STORY
Tess Vigeland: Remember about a month ago when I mentioned that if you had done all the proper financial planning right now is an incredible time to buy a house? Mortgage rates are at historic lows, I said. Well scratch that. Now they're at even more historic lows -- 4.56 percent for the average 30-year fixed. We wondered whether that might be enough to get some fence-sitters to finally jump off. So we called up a few realtors and asked what they're hearing from potential home buyers.
Lindsey Johnston: My name is Lindsey Johnston. I am a real estate broker in Philadelphia. What I do see is a lot of possible buyers that aren't even testing the waters because they're convinced that they're not even going to qualify for a mortgage. People are under the impression that banks are not lending. Sometimes it looks like you've got to be Jesus' little brother in order to get a loan.
Tamara Gibson: Tamara Gibson> I'm with Keller Williams Platinum Partners out of Lees Summit, Missouri. Right now, it seems the biggest issue hasn't been getting the buyer qualified, but it has been on the appraisal. Like right now we find buyers that are willing to pay a certain price, however, since the comparable in the area have been slower lately, it's harder to justify that value.
Carol Ann Stough: My name is Carol Ann Stough and I have been a Realtor since 1983. Atlanta never had the wildly inflated prices. People that I'm working with are getting mortgages because they have job stability, they have good credit. People know that pay the credit crunch is out there and so if there is any doubt in their minds, they're just not looking.
Vigeland: Ok, so there's some perspective from the East Coast, Midwest, Deep South. Of course anyone who's bought a home knows the old chestnut about all real estate being local. But you just heard some fairly similar views of the housing market. We decided to find out what's going on just a few miles from our studios, in an area of Los Angeles called Mid-Wilshire. Near Beverly Hills. Hey! It was a nice day outside, OK?!
Peter Wendel: The house has a eastern feel about it in the country English style.
We met up with Peter Wendel. A 20-plus year veteran of the real estate wars. He was holding an open house for fellow agents.
Wendel: With this big back porch, which is very typical of an East Coast or even Mid-West property where everybody can sit on the porch and view the beautiful backyard.
Vigeland: How many square feet?
Wendel: It's about 2,500 square feet. And the lot is about 7,500 which is a good size for this neighborhood.
The listing price for those 2,500 -- just under 1.2 million dollars. Like I said all real estate is local, and Beverly Hills does not reflect, well, anything. But I asked whether the current price of mortgages is bringing out more potential buyers.
Wendel: Well interest rates are definitely a key factor for people being motivated to buy. What's coupled with that though is that it is very difficult to get a loan. Under normal circumstances, especially as compared to two or three years ago when all you had to do was be breathing to get a loan. Even though buyers are interested in purchasing, they have to be put through the hoops with the lenders.
Vigeland: Do you find that people are coming out and looking purely because they're seeing the interest rates are at historic lows?
Wendel: Not that as much as all of last year everything was in such turmoil, people sort of just put things on hold, and interest rates were relatively low last year but people were just totally not knowing whether they were coming or going.
Vigeland: As we talk about a reason to get into the housing market with these historically low interest rates, what are you hearing from your potential buyers about the ability to get a loan?
Wendel: The lenders are still, it's a total fruit basket upset as far as how they do their business and especially where they've merged three or four banks together. Sometimes you don't know until the last minute whether the loan is going to go through and sometimes at the last minute the loan doesn't go through. For example, they've done an appraisal on the property, and just a week before the close, the lender decides we need to do a review appraisal and they send out a different appraiser and that appraiser comes up with a lower value and it skews the whole thing.
Vigeland: And this could be within, what, 30, 60 days of the last one.
Wendel: Yes, absolutely.
Vigeland: So I mean, we've heard that the advice is, hey you know if you have a great credit score, if you have the income. If you have the ability to pay the loan, you're going to be able to go out and buy a house. But it sound like it's not even as easy as that.
Wendel: Well you definitely want to have those things but then that's just the starting point. The appraisal situation has been the most difficult situation at this point.
Vigeland: How so?
Wendel: Well actually you want to talk to one of these guys here?
Vigeland: Sure. So tell us who you are and what you do.
John Barrentine: John Barrentine with Keller Williams Realty Larchmont and I've been selling homes for 21 years.
Vigeland: Well what's your take on how much of a role the historic interest rates are deciding in finally coming out and look at houses.
Barrentine: Very little I think actually. I think it has more to do with the economy in general and people feeling secure with their purchase.
Vigeland: Meaning what? That they just think things are getting better?
Barrentine: Meaning that as volatile as the market has been over the last 24 months, that there is still a lot of fear and trepidation in the market and I find that people tend to be fear-based.
Vigeland: What are they afraid of?
Barrentine: They are afraid of the other shoe dropping.
Vigeland: Like a double-dip recession?
Barrentine: Absolutely. And I think the media fuels that for them on a daily basis.
Vigeland: So when you have new clients coming to you, what are they saying about the reason for coming out now? The buyers that do have faith in the market, those are the buyers of the moment. They also believe that prices are at historic lows. It sounds like what you're saying really is and I think that we find this in general in the population is that there is this bifurcation of whether people believe that we are in a full economy recovery or whether they're in the camp that really believes the folks that are saying there is more real pain yet to come.
Barrentine: Well if you read the news, on a daily basis, it's not bright and sunny. So you really have to have a personal theory about what's happening with the market and I think at this point everyone does and so those that have made their mind up that this is not the time to buy, they should not be buying. But those that are well-educated about the market and feel the value is there, they're definitely moving forward and taking advantage of a great opportunity right now.
Vigeland: So Peter, that's really interesting what John was saying about, the division within potential homeowners is the same that's going on with investors and anyone involved in this economy. It's whether you have a positive outlook on it, or whether you have a negative outlook on it.
Wendel: That coupled with the people who are sitting on the sidelines that don't want to wait any longer because I've found that that happens in every market that is going up or down or uncertain. Many people will wait until they think that they know what's going to happen and when they realize that they don't know what's going to happen but enough time has gone by then they act anyway.
Vigeland: Alright Peter, thank you so much. It really was a pleasure.
Wendel: It was a pleasure having you
Vigeland: Can we take a tour?
Wendel: You certainly may.