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A Buyer's Market

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Mills County Housing Market Showing Signs Of Recovery

By Joe Foreman, Editor

It’s been a rough, cold winter in more ways than one for the real estate market in southwest Iowa, but it appears things are starting to warm up just in time for spring.

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Glenwood-area real estate professionals say there’s been an upswing in activity over the past month, a trend they hope will carry over well into the summer.

“During the winter, I think everybody was in a little bit of a holding pattern,” said David Hughes of Jim Hughes Real Estate. “It’s always tough to predict what’s going to happen, but it seems like people’s attitudes are getting better. It seems like we’ve had a little momentum here, especially the last 30 days.”

Home builder and Realtor Ed Cambridge of NP Dodge Real Estate said there’s no doubt that a national struggling economy and a wave of negative financial news in the last quarter of 2008 had an adverse affect on the southwest Iowa real estate market.

Cambridge said he first noticed the impact late last year.

“My experience is that last fall, it definitely slowed down,” Cambridge said. “We saw a lot of people at the Parade of Homes in October. Then, they sort of lost confidence. In November and December, during the election and with all the bad economic news, people really felt bad about the economy and they just decided to hold off.

“We noticed an increase in activity, more attendance at open houses in February and March.”

The bad economic news over the past half-year has included major bank and corporate collapses, a downward spiral of the stock market, a tightening of available credit, taxpayer bailouts of the banking industry and others areas of corporate America, a steady rise in unemployment numbers, company closings, downsizing, wage cuts and employee furloughs.

The global recession quickly became recognized as the worst economic times since the Great Depression.

Add up all the negative factors and it isn’t surprising that the sale of homes has taken a hit and maybe even bottomed out in some regions of the country.

“Our market has stayed relatively steady,” Hughes said. “We just haven’t seen the huge swings like some of the other markets have. Our prices have stayed relatively steady. The thing we haven’t seen in our market over the last couple years that we’re used to seeing is an increase (in home values). It’s a positive, based on what we hear in other markets. We haven’t seen huge percentage drops, but on the other side, we’re not seeing the increases that we usually see. Things have been in little bit of a holding pattern.”

The silver lining for potential home buyers is that there are some good deals out there, interest rates are at historic lows and some government programs and initiatives set up to give the real estate market a shot in the arm and stimulate the national economy are actually showing signs of being effective.

“The housing market has been slow, but with the rates going down the last few weeks, it’s made for a lot of activity. We’ve seen a huge increase in loan applications in the last week,” MJ Mortgage owner and manager Jodi Evans said during an interview in late March.

Grant Dean at Glenwood State Bank echoed the thoughts of Evans, noting that the interest rates are attractive to both home buyers and customers interested in refinancing existing loans.

“It did slow down, but I’d say it’s picked up a little bit here lately,” Dean said. “I think it (low interest rates) definitely plays a factor for us.”

A federal stimulus program enacted in February, an $8,000 tax credit for first-time home buyers, has generated some much-needed momentum for real estate sales, Hughes said.

“I don’t know if it’s something that we’ll ever see again. It’s a pretty amazing deal,” Hughes said. “It really kind of blew our minds a little bit when we learned about all the details. It’s really an awesome opportunity for people that were maybe renting and thinking about buying their first home.”

The $8,000 tax credit is available to qualifying home buyers who haven’t owned a home in the three years leading up to their purchase date between Jan. 1, 2009, and Dec. 1, 2009.

Every dollar of the tax credit reduces the home buyer’s federal taxes by one dollar or increases their refund by a dollar on either the 2008 or 2009 return. For example, a couple who has a tax liability of $9,000 after figuring out their 2009 taxes would actually only have to pay the Internal Revenue Service $1,000. If, instead, the couple was owed a $2,000 refund, the $8,000 credit tacked on would boost the refund check to $10,000.

There are some income restrictions on qualification for the tax credit. Single filers (or head of household) can make up to $75,000, while married couples filing jointly can earn up to $150,000 for the full tax credit. The credit phases out for singles making between $75,000-$95,000 and couples earning between $150,000-$170,000.

None of the tax credit is required to be paid back to the IRS as long as the home buyer retains ownership of the property for at least three years.

In addition to the tax credit, low interest rates, as low as 4.75 to 5.25 on 30-year fixed mortgages, and special financing programs, like the USDA Rural Development Loan, are making home buying attractive for the first-time buyer.

“The USDA guaranteed program is a great program for the first-time home buyer,” Evans said. “It’s 100 percent financing and it’s a great interest rate. It’s a 30-year fixed rate and it has no private mortgage insurance. There are income limits for that program.

“The next best program would be an FHA program, which has been around for many, many years. It’s a 3 1/2-percent down payment program. They’re more lax on credit scores, the private mortgage insurance is lower and it has a very good interest rate.”

In addition to first-time buyers, Cambridge said he’s seeing an increase in owners of moderately-priced homes wanting to move up into their second or third home. Although these buyers don’t benefit directly from the $8,000 tax credit, it does increase the number of potential customers out there who might be interested in purchasing the home the second- or third-time home buyer is trying to sell.

The low interest rates are a benefit to all home buyers, Cambridge pointed out.

Although the tax credits and low interest rates are out there, Evans cautions that qualifying for a loan or refinancing isn’t quite as easy as it used to be.

“The media doesn’t realize that yes, the rates may be great, we may be sitting at 4.875 today, but then there are adjustments for your credit scores and your loan to value. Those adjustments will affect that 4.875,” Evans said. “We usually recommend when someone is looking to buy a house or looking to refinance to do a loan application. That way we can get the credit reports and get their credit scores. From there, we can work forward and give them a true cost and a true interest rate factor based on their situation.

“Are less people qualifying for financing? Yes. Do they need to do this? Yes. They’ve gone from one extreme to another. Two years ago, if you had a pulse, you were able to get financing. Today, they’ve made it difficult for someone with good credit scores to get financing.”

Evans said there is talk and signs that those tight lending standards will be loosened this spring. She stressed that there is money out there to be borrowed.

“It’s a great time to buy. If someone is looking to buy, they should be out there right now,” she said. “Prices are good, rates are good and there is money to borrow.

“You hear stories that there’s no money out there, but that’s not the case.”

Cambridge added that there’s also some encouraging news for sellers. Over the last year in southwest Iowa, Cambridge said, prices have remained relatively steady and homes are selling on average for 95 to 96 percent of their listing price. A home placed on the market in the Mills County area is selling in about 75 days, he said.

“The key is to have it priced right with comparable home sales in the last six months to a year,” Cambridge said.

Currently, Cambridge said, there are approximately 240 single-family (residential and acreage) listings in Mills County and surrounding areas.