Are Columbia and Lexington banks still lending for new construction?

In light of the current national and global economic issues, there seems to be some confusion out there about whether or not banks are still lending money. To find an answer to this question for the Columbia and Lexington SC areas, I decided to ask my friend and associate Todd Mitcham at BB&T Mortgage. I found his response refreshing and contrary to much of what we're hearing in the media or on the national level. So I'd like to share what Todd said here:

"We are still lending money the same as we always have. On construction loans we still do 95% loans and we still base the value off of the appraised value and not the cost (so if it appraises for more than the cost as it often does we give the client "free" equity). So, nothing has
changed.

The problem is that I've got no one asking for any loans. It is not that we aren't loaning - it is that no one is borrowing. However, I wonder if no one is borrowing because they think we are not loaning."

And I am wondering the same thing. But if you've read this, you now know that there are banking institutions right here in the Columbia and Lexington SC area that are lending money for qualified borrowers. Todd Mitcham of BB&T Mortgage is one that I would recommend. He has been in the mortgage lending business since 1992 and he has provided great service to many of our custom home clients. Todd can be reached at 803-251-1404 or by email.

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US Financial Crisis?

I've emailed a few friends today about this week's roller coaster ride known as Wall Street. It's been crazy to watch as large financial institutions have gone belly up and the government has stepped in with attempts at saving it. Meanwhile the media has been in a frenzy and has informed us that the sky is in fact falling. But just look at how the DOW has performed this week and you'll see it's actually trading higher than when the week began (as of 10:40am on Friday).

And do you think the current economy's condition has affected getting a mortgage here in the Columbia/Lexington area? Well, from what I'm hearing, not by a great extent. Some of their qualifications are a little tighter but if you are in a stable job with a good credit score you should be fine. I can refer you to someone locally if you'd like more information.

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Getting Busy

This is my first post for the month of April. The main reason for that is things are starting to get busy again. Over the last two weeks we've had some good new activity:

• Signed two contracts for investor speculation homes
• Started the design/drawing process for a home we'll build on Lake Murray this year
• Bid on a client's home addition and garage
• Bid on another client's garage and room over
• Met an associate at their lot to discuss building their custom home

In addition to these new activities, the custom home we're building in Lexington right now is going very smoothly. In just 8 weeks we've completed the footings, crawlspace foundation, exterior veneer, framing, roofing, doors & windows, electric rough-in, plumbing rough-in, HVAC rough-in, and the drywall. All that and we had 4+ rain days that slowed us down! At this pace, the house will be done in a total of 4 months. We told the client it would take 5 to 6 months. That feels good!

You hear people talking about lower interest rates being an incentive for people to build or add-on... You also hear that many construction material prices are down... And with a supposedly "slow" housing market, you hear there are trade contractors competing with their prices... We aren't just hearing these things, we are seeing it as a reality with the recent flurry of activity in our business at Master Plan Homes Inc.

If you're on the fence about building a new home, give us a call or email and we'll talk about the possibilities.

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The Truth about the Housing and Building Market

We've heard a lot about the housing market and new construction from the media. Much of what we've heard may be true in certain areas of the country, but each market is uniquie. The Columbia/Lexington area does appear to have slowed down, but it is not at a stand still. At Master Plan Homes Inc., we recently started on a new custom home in Lexington and we are working with another individual who is ready to build in Columbia.

The Home Builders Association of Greater Columbia's Buy Now Build Now web site offers a few "myth busters" that I would like to share.

Myth 1: The Sky is Falling.

If the truth be told, housing has always been a very cyclical business. In the mid-1970s and early 1980s and 1990s, housing production and sales dropped by more than 60 percent in a matter of months. During those cycles, we confronted and overcame many of the same problems we face today – large numbers of unsold homes, skeptical and reluctant consumers, tight credit markets and shortages of money for certain borrowers, declining home values, and prospective buyers who had difficulty selling their existing homes. The important thing to remember is that over time the market corrected and we rebounded to production and sales levels that beat or matched the records of the previous cycle. The message is that housing is a very tough and resilient industry. We will be back – stronger and better than before.

Myth 2: There’s No Mortgage Money.

If you believed the headlines or the endless drum beat about subprime lending on cable television news, you would think that the pot of mortgage money has dried up completely. Nonsense! The vast majority of our buyers are seeking conventional, conforming mortgages at or below $417,000. These loans are purchased by Fannie Mae and Freddie Mac and have the implicit guarantee of the federal government. While underwriting standards may be tighter for all loans, credit-worthy home buyers should have no problems in finding conventional, conforming mortgages at very attractive rates – slightly above 6 percent for fixed rate, 30-year loans. And with the latest moves by the Federal Reserve to cut interest rates and increase liquidity, the availability of money for jumbo loans has also improved for credit-worthy borrowers, although rates on those loans are about one percentage point above conforming loan rates and down payment requirements are higher. Nonetheless, getting the word out that mortgage money is available at a very attractive price for credit-worthy borrowers is critical to boosting consumer confidence and traffic of prospective customers.

Myth 3: Foreclosure Rates Are Skyrocketing.

While foreclosure rates have increased in the past year, almost all American home owners are making their mortgage payments on time and are in no danger of losing their homes. Most foreclosures are concentrated in the once super-heated markets in California, Florida, Arizona and Nevada, and the upper Midwest states of Michigan, Ohio and Indiana, which have been hit hard by job losses, plant closings and depressed local economies. In fact, in 34 states the foreclosure rate actually declined last month. We are concerned about the two million subprime loans that are due to reset over the next two years. That’s a major problem that needs to be dealt with. But it’s important to remember that 37 percent of all single-family homes are owned debt free – without any mortgage – and home owners nationwide have built up more than $11 trillion in equity that provides a good cushion against any decline in values. In addition, 97 percent of prime borrowers – the bulk of the market – are up-to-date on their mortgage payments. Also, a high number of defaults on loans to date have been among speculators or investors who were looking for quick profits and subsequently walked away from their investments when the housing market cooled.

Myth 4: Home Values Are in a Free-Fall with No Bottom in Sight.

Except for about 30 or so high-flying metro markets where home values doubled in four or five years, the correction in home values has been relatively modest. Over time, home values will stabilize and then edge upward with the next recovery. To argue that home values will continue to decline and will never recover, someone has to make a convincing argument that it will cost less to build a new home five years from now than it does today. That’s not going to happen.

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