Ongoing uncertainty

The real estate market slogs forward in Culpeper, causing something less than optimism among local professionals. Yet signs of hope are beginning to emerge in an industry still plagued with foreclosures spurred by job loss. Though it’s a mixed bag of sentiment on the state of the overall market, local experts agree on some positive news:

* homes are more affordable
* the long, sharp decline in home values appears to be stabilizing
* mortgage interest rates are low
* new construction activity, if not frenzied, is still happening in Culpeper.

As for the town of Culpeper’s plan to combat the impacts of foreclosure on three of its neighborhoods by getting into the housing business, not everyone agrees that’s a good idea ...

“For the most part, consumer sentiment is still negative about the future,” said mortgage loan officer Todd Hensley of Mason Dixon Funding on Main Street. “People are scared to death to take on long-term debts.”

The flip side of that is there are incredible deals out there for homebuyers with good credit; qualifying first-time homebuyers can also take advantage of an $8,000 federal tax credit.

“The housing market right now is very active,” said Trey Austin, associate broker with Austin Realty in Warrenton.

But has it reached bottom?

“You can’t tell the bottom until you look back a year from now, just like the stock market,” he said. “The housing market is very similar: You can have false bottoms with some recovery.”

Still, the market for foreclosed homes is especially active, local experts say, with multiple bids being received.

“There are houses right now that are foreclosed upon that are getting five, six contracts,” said Mason Dixon senior loan officer Carol Coleman. “There is a bidding war going on right now for these houses, but yet we are having appraisal issues.”

Appraisal vs. sale price
New federal regulations designed to prevent lenders from pressing appraisers to drive homes values to artificial levels — as occurred, especially among bigger banks, before the market collapsed — are having less desirable consequences as well.

Appraisers from out of the area don’t know Culpeper, said Mason Dixon loan officer Dustyn Deal, and it’s resulting in low-ball valuations. Extra appraisal fees are also being tacked on, the Mason Dixon team said during a recent interview.

Yet recent market figures for the D.C. area showed home values declined by just 0.6 percent in April, Deal said.

That’s compared to a more than 40-percent decline in Culpeper prices since 2006, when the average house sold for around $340,000, according to data from Metropolitan Regional Information Systems.

These days, houses in Culpeper sell, on average, for about $200,000 — up from a low this year in May of $165,000, according to MRIS.

The most significant factor contributing to declining values is layoffs and pay cuts, Deal said, which cause more people to lose homes to foreclosure.

Austin distinguished between home values and home prices, saying, “Some of these homes you couldn’t have built for the prices they’re going for.”

And what of the future? “I don’t see the sinking that we saw,” Austin said.

Banks slowed
One thing is for sure — the incredible foreclosure inventory is stalling bank transactions for people ready to buy.

“Banks are absolutely an impediment to the market right now,” said Austin, adding that agents often have to deal with three or four bank representatives, as the original lender may have sold the bank note to an investor in a foreign country.

“Getting approval for a short sale is very difficult,” he said of transactions in which a bank accepts a home’s payoff for less than the loan balance. “I have multiple contracts that have been out there for months.”

Coleman, a longtime mortgage professional, concurred.

“Short sales are awful,” she said, referring to one couple that has waited since February to finalize a short sale. “They finally got an OK that they would accept their price, then two days later the bank says, no, we are not accepting that because they got a new contract in the meantime that was $10 grand more.”

Deer in headlights
Julie Emery, a broker from Amissville who regularly blogs about housing, said her sense is that the market is bottoming, adding that “recovery” might be too strong a word.

“It’s hard to see a lot of appreciation in the year ahead,” she said. “But I think inventory will continue to decline as long as banks continue to not dump large numbers of foreclosures.”

As long as inventory declines, home prices will likely stop decreasing, Emery said. A combination of investors and first-time homebuyers are buying the foreclosed properties, she said, noting, “When I say investors, I mean people who intend to buy and hold and rent out the properties, not someone looking to flip them for a quick buck.”

Though the entire foreclosure inventory is not on the market yet, it’s not because banks are waiting for home values to start increasing, said Hensley.

“I don’t think banks are necessarily sitting on it,” he said. “It’s a little bit of a deer looking into the headlights of an oncoming tractor-trailer. They still have an enormous stack on everyone’s desk as far as foreclosures go, and they don’t have the manpower to service it.”

Austin, the real estate agent, agreed.

“I think they are just unable to deal with the volume: banks that used to do 10 to 20 foreclosures now have 500 or 600,” he said.

In addition, many of the banks that own foreclosed properties in Culpeper are out of state and unfamiliar with the local market.

Buyer’s market
Steve Southard, senior vice president with Virginia Community Bank on Main Street, said his bank — knock on wood — has had “very few” foreclosures. Instead, Virginia Community has done a lot of financing for folks who are buying foreclosed properties to either rent, rehab and sell or hold for future sale.

“Other than these investors, most of what we are seeing on the consumer side is first-time homebuyers because of the good programs available and it being a buyer’s market,” said Southard, former Culpeper County treasurer.

People with good credit can still get loans, he added, noting that home buying has slowed because of job worries.

“Part of the reason new construction has slowed so much is because foreclosed homes are selling cheaper than builders can build them,” Southard said.

Inflation
Mason Dixon is also facilitating loans, after reaching bottom in December.

“We are closing 17 to 20 sales a month,” Coleman said. “Probably eight to 10 are purchases; the rest are refinances.”

And interest rates are still really low — between 5¼ and 5½ percent, as of this week. Most of the new sales Mason Dixon sees are purchased with government-backed FHA or Rural Development mortgages.

Long gone are the risky, predatory models in which people didn’t even have to prove they had a job to get a house. However, to get a mortgage these days, one has to not only have a job, but good credit.

“That little three-digit number means so much,” Hensley said of a credit score.

It’s anyone’s guess where interest rates will go, but some experts believe they likely won’t be this low again for a while.

“The government is putting out so much money right now trying to sustain the economy that when it gets traction and starts to take off, it’s not if inflation happens — it’s a matter of when,” Hensley said.