Housing bucks economy

Published 12:57 pm Saturday, April 4, 2009

Editor’s Note: This is part 4 of 5 in a series examining the effects of the recession in the Austin community

Jacquie Barth spent the day in Austin Saturday searching for the first house she can call her own.

As she stepped into a small, mint-green two-bedroom on 10th Avenue Northwest, her feelings about it were evident.

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“No, not so much,” she said of the house, listed at $49,000.

Barth, 22, who is single and works full-time at Viracon in Owatonna and part-time at Hy-Vee in Austin, met with a lender, who approved her for $40,0000 to $65,000.

Realtor Mary Lindgren of Fuhrman Real Estate said there were 45 options in Austin that met Barth’s price range, although many did not fall into her criteria of two bedrooms, two bathrooms.

Their second tour was of a one-bedroom, one-bath for $61,900 on Eighth Avenue Northwest. The house had more potential, but the second-story bedroom was very small.

“People typically stay in their first house five years,” Lindgren explained as they looked through the home.

In spite of the rough economy and a nation in the midst of a recession, the Austin housing market is doing remarkably well. This week Lindgren saw another “good sign:” she had a buyer who lost a home after multiple offers were made.

“The doom and gloom is really old news,” Lindgren said. “Things are selling. We’re already doing better than 2008.”

Loans, sub-prime mortgages issues

Danielle and Troy Schaefer’s yellow, single-story home is nestled among tall, old trees in a winding residential neighborhood in northwest Austin.

After searching for more than a year and a half for a bigger house than their one of eight years in the southeast part of town, they found the perfect fit for them and their three children.

“It’s great,” Danielle said. “We absolutely needed the space.”

In January, Danielle, who works at Hormel Foods, and Troy, a self-employed painter, packed their belongings in anticipation of the closing date expected that month. Their new home, at $145,000, had more square-footage and was a good deal, she said.

It was not until three months later their new house actually belonged to them.

“We were living out of boxes since January,” she said.

The Schaefers were not able to move in until March 18, and their official closing date was supposed to be March 17.

“In the meantime, we’re homeless. Our freezer was on the front lawn of our house,” she said.

Danielle explained that although the housing market and “small kitchen” were a hindrance in selling their previous house, they experienced some increasingly common problems: picky underwriters and loan issues with their buyers.

The Schaefers had locked into an interest rate, even paying extra to extend it, and the buyers’ loan did not go through.

“It was a huge mess,” Danielle said.

Lindgren also helped the Schaefers buy their home. “It was the only deal that ever made me cry,” she said.

Danielle said they love their new home, and do not expect to go through the process again for many years.

“We will not buy again in the future unless it’s our retirement home … nursing home … coffin,” she said.

Lindgren said the issues Schaefers’ had with selling their home are becoming more common.

In Austin, Lindgren said they are seeing more foreclosures in a city that historically has had very few. Last year, the foreclosure rate went up 80 percent in southeast Minnesota.

However, unlike other parts of the country experiencing massive layoffs, she attributes the increase in foreclosed homes to sub-prime mortgages.

“Those loans were given to people who should have never bought a house,” Lindgren said. “They weren’t ready.

“The sub-prime mortgages — that’s what caused our foreclosures,” she said.

Austin housing market ‘hot’

A market that has never really had a housing “boom,” Austin has positioned itself well in the recession. Markets in Florida, Nevada and the West Coast are now seeing the disastrous effects of the economy, Lindgren said.

In addition, home-buyers — and sellers — are waking up to the notion that the market here is not as bad as other parts of the country.

As of this week, 222 homes were on the market in Austin; that number was as high as 350 last year.

Lindgren said there are many incentives right now for people to buy and sell homes, whether they are first-time homeowners or experienced buyers.

The interest rate was at 4.5 percent Thursday, the lowest Lindgren has ever seen in her decades in the real estate business. In comparison, the rates were between 23 and 25 percent in the 1970s, she said.

“That’s probably lower than it’s been … since during the Great Depression,” she said after some thought. “It was higher then.”

Also, first-time home-buyers now qualify for a 2009 tax credit. A credit of up to $8,000 is available for qualified buyers purchasing a home on or after Jan. 1 and before Dec. 1.

Home-buying is already picking up, and Lindgren said the warmer weather and green grass of spring encourage people to go house-hunting — and selling.

“That’s really going to jump-start things,” Lindgren said.

But the market is not perfect, she explained. Homes in Austin have showed a depreciation of about 10 percent in 2008. Also, homeowners who have only owned their homes for a few years should either hold off before selling or “crunch some numbers,” Lindgren said.

“If people have to move, they’re going to move,” she said. “We do have a pretty transient area.”

Lindgren said she expects the only thing stopping Austin’s housing market from having a good year is “people with bad credit.”

“I really believe this,” she said. “I’m not just trying to be a ‘rah, rah Pollyanna.’”

At RE/MAX Realty Plus in Austin, Realtor Scott Ulland agrees not only that this area is bucking the miserable housing market trend — he says it’s “hot.”

“We do have values that are down,” Ulland explained, “but we continue to have spring fever. People are sick of the doom and the gloom of the marketplace. We feel as though the buyers and sellers are coming to that conclusion themselves.”

Ulland, a Realtor of 23 years, believes the area’s conservative population and stable employers are why Austin usually has a steady housing market — it’s never extremely up or down.

“We had a dramatic dip in real estate in the 1980s,” he said. “Interest rates were close to 20 percent for houses. This is just one of the normal cycles in real estate.

“At our office, we feel like it’s going to be one of our best years ever,” he said.