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Wondering How the Housing Situation Affects You?

By Marcia Peterson

March 27, 2009-- Many of us are confused by what has happened and what is expected to happen with the housing industry, and have been wondering how it affects us individually. We see frightening stories about home foreclosures, falling home prices, and the inability to obtain a loan to buy or refinance a home. All of this is further complicated by doom and gloom media coverage that often focuses on worst case scenarios.

What is the foreclosure situation in our area? Wisconsin in general has fared better than much of the nation when it comes to foreclosures. First of all, we tend to be a more conservative credit market. Secondly, our home prices were not as volatile as prices on either coast, in Florida, Arizona, or in some larger cities. Lastly, we had fewer subprime loans here than in other states. A University of Wisconsin-Extension analysis of civil court cases found that the number of properties facing foreclosure in Wisconsin was up 26.3 percent in 2007 over 2006, and up 31.1 percent from January through September 2008. However, as the UW-Extension notes, foreclosure cases for the last quarter in which data is available (July-September) were up only 6 percent from 2007. Most of our market has experienced foreclosure rates under the state average. The UW-Extension analysts spent time eliminating duplicate and incomplete data to come up with more reliable information. Depending on your sources, you may find dramatically different reports. Will foreclosure rates go higher? Typically, as unemployment rates rise, so do foreclosures.

How have home prices been affected? Again, we have not had the same experience as the rest of the country. As of the end of 2008, prices nationally had fallen 9%, while prices in Wisconsin had fallen 5.3%, according to the Wisconsin Board of Realtors. Several of the counties in northeastern Wisconsin have actually seen increases in average sales prices, with Oconto County increasing almost 20%, Door County up 12%, and Winnebago and Brown counties both rising about 1%. Our biggest challenge right now is actually seasonal lack of sales, since this is typically a slow time for buying and selling homes.
How difficult is it to buy or refinance a home? And what is happening to rates? Individuals with excellent credit and at least a 10% down payment will find that this is a good time for them to buy a home. Plenty of homes are available for sale, prices and rates are good, and credit is available. Many home builders are willing to offer discounts or free upgrades to attract buyers. Alternatively, homeowners with the cash to improve their homes can find a selection of craftsmen and exceptional prices. The one problem we have been running into is that with so few sales, getting an appraisal done may be a challenge, especially if the home is unique or in a higher price range. Appraisers need to find comparable sales within a six month time frame, and sometimes this becomes an issue. This same problem applies to refinances. Even with good borrowers, we still need to prove value and this proof comes from the appraisal.

Whether or not it makes sense for you to refinance your mortgage is dependent on your existing loan rate and the amount of time you expect to stay in your home. Contact your financial institution to determine what works best for you financially.

What are the new president and our government going to do? President Obama's economic stimulus bill contains numerous measures to help Americans get through the recession by providing tax rebates, mortgage assistance, and a number of other financial incentives to offer hope and relief. There are literally dozens of tax credit and funding options for individuals contained in the stimulus plan. One example is the Making Work Pay Tax Credit, which creates a tax credit in 2009 and 2010 of $400 or 6.2% of earned income (whichever is less) for many individuals. The best and quickest way to benefit from this credit is to make sure that your employer decreases your withholding to reflect it. Due to the complexity of the many stimulus bill provisions, it is recommended that you consult a tax specialist to ensure you can receive the maximum benefits.

So what is the consumer to do? First of all, do your research. Deals can be found, both for home prices and for loan rates. Secondly, pay attention to what the government may be offering. There may be incentives for individuals who want to buy their first home. There may be benefits for those who are struggling with current mortgage payments. Nothing is decided but it is quite likely that the Economic Stimulus Package will earmark funds for housing. Lastly, for those struggling with current mortgage payments, talk to your lender. Don’t wait until you start to miss payments. It is in everyone’s best interest to find a way to keep you in your home and making some type of payment.

Marcia Peterson is a Private Banker for Baylake Bank. Baylake Bank, Member FDIC/Equal Housing Lender, employs over 320 individuals throughout northeastern and central Wisconsin and serves its communities from 28 financial centers in Brown, Door, Green Lake, Kewaunee, Manitowoc, Outagamie, Waupaca, and Waushara counties and from its web site at www.baylake.com. For more information call 920.743.5551 or 800.267.3610.