Clipper Staff Writer
WEST BOUNTIFUL — The home loan industry has been on something of a roller coaster in recent years.
“I watched a loan officer at a previous employer go from making $40 million in home construction loans yearly to reading a book,” said Golden Moore, a home loan advisor with the First National Bank of Layton.
Moore, a Bountiful native and Woods Cross resident, spoke before the Bountiful Breakfast Exchange Club.
The scandals that rocked major home loan lenders in the last decade caused home sales and new construction to drop significantly, but both home sales and construction are beginning to pick up and mortgage rates are once again beginning to rise, Moore said. The trend is expected to continue despite the fact that new construction starts were down in June by 10 percent over 2012.
“Despite an increase in the builder sentiment index yesterday, new construction is leveling off,” said Quicken Loans Chief Economist Bob Walters in a press release distributed by the loan industry when the U.S. Department of Housing and Urban Development released the numbers. “Rising rates have dampened some demand, although the market will grow at a healthy pace in the coming months.”
Meanwhile, renters are thinking more about purchasing homes than they have in recent years, according to the 2013 National Housing Pulse Survey, conducted by the National Association of Realtors.
The survey measures attitudes and concerns about housing opportunities. Results released in late June found that eight in 10 Americans believe buying a home is a good financial decision, and 68 percent said now is a good time to buy a home. Since 2011, more renters are considering purchase, up from 25 percent to 36 percent, and people who prefer renting dropped from 31 percent to 25 percent. Half of renters said that eventually owning a home is one of their highest personal priorities, up from 42 percent to 51 percent, according to the survey results.
The selling price of homes has also risen. In May, home prices were up in major national markets 12.2 percent compared to a year before, according to eh S&P/Case-Shiller price index. In April of 2013, according to a Utah study, the price for homes had risen 9 percent, he said.
But to get back to 2006 peak nationally, rates would still have to gain 50 percent, according to the S&P report.
Lenders are being more careful about who they lend to, and borrowers looking to get into a home in the $300,000 to $400,000 range are struggling, he said. Interest rates are also beginning to rise. Within a two-week period this summer, interest rates on home loans were up by 2 percent, Moore said.
“It’s an interesting time for mortgage lenders,” Moore told club members.
Right now, loan officers are struggling to provide loans for retired borrowers who are in good financial shape.
“We really have to put our retired customers through the hoops to borrow,” Moore said. “Many haven’t taken out a loan for years, but we’re seeing them now take out a mortgage for a child who may be struggling.”
Another group that may be having trouble getting loans is the self-employed.
“For example, they say their business made $100,000 last year, but they’ve been legally taking deductions and reporting an income of $8,000,” Moore said. Virtually no lending institution would loan money to someone with such a low income.
Anyone who is self-employed and is considering buying a house in the future should consider taking fewer deductions for a couple of years, “to show they have enough income to qualify,” Moore said.
Interest rates could “close in on 5 percent by mid-2014 and go even higher in 2015,” said Lawrence Yun, chief economist and senior vice president of research for the Realtors association, in a blog. With a return to what he calls normal underwriting standards, however, 15-20 percent more households will qualify for loans within a few years.