For real estate agents coping with Rhode Island’s struggling housing market, last week’s meltdown on Wall Street was hardly welcome news. Nothing that threatens to undermine buyer confidence or the availability of credit is ever good news for the real estate business.
But as the fall real estate market gets under way, most brokers and salespeople, already used to new market realities, are continuing to soldier on, according Rob Scaralia, president of the Rhode Island Association of Realtors.
“We’re still working our way through it,” Scaralia said of the market downturn.
Turmoil on Wall Street has the potential to hurt consumer confidence, he said, “by creating some uncertainty” for buyers.
But the inventory of residential properties for sale in Rhode Island was down across the board this month compared with September last year, according to the association. There are 6,693 single-family houses for sale, compared with 6,874 last year; 1,536 multifamilies for sale, compared with 1,864 last year, and 1,762 condos for sale, compared with 1,793 last year.
“The candid answer is we’re not sure yet if it will have any impact on us,” Ron Phipps, of Phipps Realty, of Warwick, said of the financial crisis on Wall Street. Phipps is a former president of the Realtors’ association.
In his own office, “we had a major closing [last Monday], and two more closings scheduled at end of September,” Phipps said. “I think people are doing what we need to do.”
Phipps said the challenges at this point are all the foreclosed properties that have flooded the market and the credit crunch.
“When one in every four or five transactions is REO [real-estate owned, or foreclosed properties], that makes it particularly difficult,” Phipps said.
Bargain-savvy buyers can’t help comparing prices of market properties with the distressed ones. And the sale of distressed properties — including foreclosures and short sales — “take forever to resolve,” Phipps said.
Lenders often take weeks or even months to respond to an offer to buy a foreclosed or short-sale property, Phipps said.
These delays have become legendary in recent months as lenders’ loss-management divisions have been overwhelmed with the sheer numbers of foreclosures and requests for short sales.
Tightened credit is an issue, Phipps added. “The demand is fairly strong,” he said. “…The problem is access to the money … We need to create true liquidity.”
“I think that the days of all of those funky no-doc loans, and the crazy loans that were out there, and the risky loans, we’re not going to see them for a while to come,” said Stephen Tetzner, an owner of HomeStar Mortgage Inc., of Providence, and one of the directors of the Rhode Island Mortgage Bankers Association. Tetzner said the government takeover of Fannie Mae and Freddie Mac earlier this month “did wonders for mortgage rates,” delivering the lowest rates since April or May of this year.
“There is a credit crunch,” Tetzner admitted. But people with good credit, who can document their income, “can get financed,” he said. Low down-payment programs are still available through FHA, and Rhode Island Housing is still able to help qualified first-time buyers with 100-percent financing, he said.
Tetzner added that condominium financing is more difficult in this market because “mortgage insurance companies are scared about the values” in the condo market. Many condo financing programs now require a bigger down payment, he said. And he said that condo conversion projects with less than four units “are not insurable” under HUD guidelines.
But the Fed’s decision last week to hold off on a further cut in interest rates “is not necessarily a bad thing,” Tetzner said. “Just because the Fed lowers rates doesn’t mean mortgage rates will go down.” Fear of inflation can drive up mortgage rates even after the Fed cuts rates, he said.
This market, as difficult as it is, “is not as challenging as it was in the early 1980s after the credit union crisis,” Phipps said.
Phipps said he strives to be honest when buyers ask him to “guarantee that the price won’t drop” by admitting that it is a possibility.
He said he tells buyers that although property may lose some value in the short term, “in the interim you’re going to be in the house you want.”
But for people who plan to stay in a house only for a year? “Maybe you ought to rent,” Phipps said.
Christine Dunn, Providence Journal September 21,2008
www.phippsrealty.com
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