People who receive housing counseling before they borrow are much less likely to default. Research shows that 75 percent of at-risk homeowners who meet with U.S. Department of Housing and Urban Development housing counselors and attend loss mitigation programs won’t be foreclosed.
It’s a hot topic right now, and one that John Gemmill, director of the Memphis field office of HUD addressed Thursday, May 3, when real estate information company Chandler Reports hosted its “Master Your Market: 1st Quarter 2012 Update.”
“Housing counseling is an incredibly effective program,” Gemmill said. “Talk about something very inexpensive that reduces the pain of the economic crisis, this is one of them.”
But Gemmill said Congress zeroed out the housing counseling funding in 2010 after it had just reached record peaks, adding that “the miracle really is that there’s any money for housing counseling at all right now.”
“We are trying to manage the flow of money, it’s been refunded, and hopefully, there’s some good news in housing counseling,” he said.
The quarterly forum, held at The Great Hall & Conference Center, 1900 S. Germantown Road, centered on residential and commercial sales, plus new housing and loan activity.
The first-quarter performance was the best since 2008 based on total number of sales (3,178), but homes reached the lowest average quarterly sales price in more than 10 years. Sixty-two percent of all home sales in Shelby County last quarter were valued at $100,000 or less.
Foreclosures rose 30 percent from Q1 2011, while notices dropped 30 percent. The average foreclosure amount has been declining, but average tax appraisal value is creeping back up.
One move in a positive direction is the recent $25 billion U.S. Attorney General settlement with the five largest servicing lenders.
“The settlement is a big deal and we hope it might be turning the tide on some of the foreclosure prevention efforts,” Gemmill said. “The state got $141 million that they’re putting into mostly going into the Tennessee HUD agency, a lot of which is going to go to housing counseling and foreclosure prevention.”
Another positive for Memphis was being selected to participate in the White House’s “Strong Cities, Strong Communities” program, which streamlines direct federal engagement with local government to “cut through the red tape” and build local capacity.
Gemmill said a prime example of the program is the recent landing of the Great American Steamboat Co. in Memphis. HUD financing through the city helped stimulate private investment.
Meanwhile, he said multifamily is the major source of new housing starts and the only commercial real estate sector with growth potential in the next five years.
While multifamily sales were down 13 percent from last year, the sector had the most sales revenue with 20 sales totaling $87.2 million. It was followed by industrial with $36 million and retail with $19.7 million.
Average prices of multifamily properties have remained fairly consistent over the last three quarters, averaging $4.5 million while all property types are down. The largest CRE foreclosure of last quarter was the $1.7 million foreclosure sale of the 259-unit Overlook Apartments in Frayser.
On the residential mortgage side, David Umsted, vice president of Merchants and Planters Bank Home Loans, has seen a large uptick in business.
“It’s been a little exponential for us because there have been a lot of lenders and real estate agents that have gotten out of business, so our share has increased,” Umsted said. “You can still get a loan but you have to be able to pay that loan. We’ve talked to many clients who have gotten into a bidding war on houses right now so it’s a positive thing.”
Umsted said the 10-year loan as of Thursday, May 3, was at 2.875 percent.
“We hope they stay low and we think they will,” he said. “The Fed has said they plan to keep rates low until 2014.”
But despite low rates, sales activity is stagnant. Joe Spake, broker with inCity Realty who focuses on the Midtown and Downtown markets, said young people who can afford to own a home, are choosing to rent – even if that means a higher monthly payment than a mortgage.
“People don’t want the hassle of condo fees, of mowing the yard,” Spake said.
Chandler Reports is a division of The Daily News Publishing Co. Inc.