Tighter North Carolina Mortgage Standards Lead to Fewer Buyers

The tightened home lending standards caused by the bad credit home loan mess haven’t just affected potential borrowers or their lenders.

They also are having an impact on the local real estate market, though just how much is uncertain.

The reasoning is that if fewer people qualifiy for a mortgage, fewer people will be able to buy homes. And homes for sale are what the Wilmington, North Carolina housing market is full of.

“Of course (the tightening) has had an effect on the new-home markets,” said Donna Girardot, executive officer of the Wilmington-Cape Fear Home Builders Association. “There are fewer people qualifying than before.”

Builders are offering incentives and home construction has slowed, Girardot said, but the area has bucked the national downward trend in sales.

Completed homes for sale constitute about 33 percent of the current inventory, while 51 percent of units are under construction and 16 percent have received permits but are not started, Girardot.

But larger threats to the housing market, according to Girardot, continue to be Wilmington’s sewer problems and the cost of land and materials.

“There definitely are fewer people in the market than two years ago,” said Pete Frandano, principal at Southport Realty. And with the tightening of North Carolina mortgage lending rules, you “have to really make sure you’re pricing properly.”

“Sellers need to lower their expectations from two years ago,” Frandano said, pointing out that we’re in a cycle where the market heavily favors the buyer.

However, he sees a strong market due to Brunswick County’s appeal, saying that neighboring Horry County, S.C., is saturated.

In New Hanover County, a nominal number of closings have fallen through because of mortgage problems, said Lenora Norris, managing broker at Coldwell Banker Seacoast’s Wilmington office.

But she sees a pent-up demand for homes here, despite the sizable inventory of homes for sale.

“California is a big market for us. They’re paying cash,” Norris said. “That type of client has helped us to maintain our property values.”

The area is well off compared to other parts of the country, according to Brenda McDonald, president and manager of Lumina Mortgage in Wilmington.

The Mortgage Bankers Association reported this week that loan delinquencies had risen nationwide in the second quarter and that new foreclosures broke a record. But it attributed much of the bad news to a few states, including California and Florida, where home prices have been declining, preventing homeowners from refinancing out of expensive mortgages into lower-cost loans.

Walter Moloney, spokesman for the National Association of Realtors, has a favorable view of the area’s housing market: “The Carolinas have been a bright spot.”

SOURCE: The Wilmington Star