Kansas City Lenders Are Optimistic
by Gigi Cowell
Amid all the national fervor surrounding
sub prime mortgage woes, daily tabulations
of foreclosures and confusing interest rate
reductions, some believe that Chicken
Little was right—the sky is falling.
However, mortgage brokers and real estate professionals in the Kansas City area tell a slightly different story. Yes, they will agree that what has happened in the past was based on less than prudent decisions by lenders, but believe that the current state of home-buying and mortgage lending is far from hopeless.
According to the most recent information gathered from the
Kansas City Regional Association of Realtors, existing home
sales in the Greater Kansas City area increased 25 percent from
January 2008 to February 2008. New home inventory decreased
in that same period, from 4,601 to 4,435, which contributes to
an 18 percent decrease from this same time
last year. Overall, the prognosis seems to
be good for future home sales in general
in this region of the state.
Ronald Regan, senior mortgage officer
with Diamond Mortgage Group in Overland
Park, Ks. notes that although existing
home sales have increased in many areas
of Kansas City, the average sale price has
dropped. Generally, this means that for
those looking to buy their first home, or
step up to a larger home, this may be the
perfect time. On the flip side, those interested in selling are
finding that they must be willing to rethink the value of their
home, and possibly settle for much less when an offer finally
comes their way.
“The psychology is quite unusual. Sellers are crushed
when they do not get what they want for their house. But the
fact that they then buy another house for less than market
value does not phase them at all.” states Regan. It seems to
be double-edged sword.
The explanation for this situation may be found in the basic theory of supply and demand. In this case, supply is determined by accounting for the total housing inventory and then dividing it by the total number of sales. If unsold homes are on the market for five or six months, it is generally accepted that we are in a “balanced” market, in which case, favors buyers. If unsold homes are on the market for less than five months, it is considered a sellers market. Most agree that we are currently in a “buyers” market, with the average Kansas City home remaining on the market for nine months.
As far as mortgages are concerned, mortgage companies are seeing inquiries spread equally between those seeking new mortgages and those wishing to re-finance. With a current mortgage rate of 5.85 nationally, it is undoubtedly a great time to buy a home. It is also a good time to re-finance, either to get out of an adjustable rate mortgage, or to lock yourself into a fixed rate you can live with.
Holding out for lower interest rates is probably not a good idea. Kris Drake, branch manager of Plaza Mortgage in Overland Park, believes that we have seen the best of the low interest rates. “From here, it is going to be a sideways to increased interest rate forecast,” he predicts.
Additionally, he believes that it is the Midwestern conservative
attitude that has helped this area to hold up under a
sea of foreclosures and mortgage mis-management. When
many lending institutions were handing out products to people
who had questionable resources for repayment, Kansas
Citians were a little less likely to jump on the bandwagon.
“Kansas City has been one of the most stable markets in the United States” notes Drake. “Most of the damage control is taking place in markets like Phoenix, California and Miami. These types of markets tend to get into buying frenzies, and then at some point prices peak and eventually spiral downward.” This is one reason so many find themselves in the position of not being able to afford their mortgage payment, and/or not being able to sell their home.
Because so many sub prime borrowers have defaulted on their home loans, it has become increasingly important to maintain a tight grasp on standard qualification schedules, and lenders are imposing tough new standards on loans to anyone with less than excellent credit. As a result, the mortgage industry is involved in a combination of qualifying new mortgages, as well as finding re-financing options for those who wish to keep their home but lower their payments.
Dave Pleskac, a realtor with Reece & Nichols in Leawood, says there is no mortgage rate trend that is especially prevalent in Kansas City, but rather a national mortgage rate trend, and that the rate changes daily. “Currently the 30-year fixed rate is at 5.85 percent, which makes it a great time to buy a home in Kansas City.”
Based on the fact that interest rates are low, and there is
a wide variety of homes on the market, lenders are optimistic
about the future. 