WPCNR QUILL & EYESHADE. John Bailey Interviews Bob Meyerson. June 22, 2008: To get a sense of what today’s housing market is really like in White Plains, WPCNR interviewed Bob Meyerson, a mortgage banker with offices in White Plains with Wachovia Mortgage. Meyerson has been a mortgage banker for thirteen years in the White Plains market, and as he put it, he was there “when the real estate boom started, and now here at the end.”

Asked how the White Plains market is today, Meyerson described it as “coming back, slowly coming back. Real Estate firms are starting to do business."

He said larger real estate firms in the White Plains market were doing better, but felt the smaller firms were hurting and not all of them would survive.

Everbody Wants to Live in White Plains

In the White Plains market, from his perspective, the $400,000 to $800,000 homes were holding their own:  “When a good house in that range comes on the market, it is snapped up, while homes priced at $800,000 and above are taking a longer time to sell.”  Marginal houses with issues, i.e. location, and condition are languishing no matter what the price.

 He said that lowering the price on a higher-end home does not necessarily mean it will sell faster.  Upper end mortgages are harder to come by.  The right buyer is out there but there are fewer qualified.

The Jumbo Problem

Meyerson explained that mortgages on homes priced at $400,000 to $800,000 range are routinely sold to the secondary market while most larger banks continue to service them. However, mortgages (jumbo mortgages) over $729,000 and up are not as attractive to the secondary market as the loans sold to Fanny Mae and Freddie Mac

He said banks are not eager to make mortgages for a million to $2 million any more. He said this is a factor that keeps homes priced over a million dollars from selling quickly. He noted that a client of his had gone to contract on a property, but could not sell his present house in time for the close of his new residence. Fortunately, Meyerson said, other buyers were interested in purchasing the new property for more money, and his client was let out of the contract. Liers Loans (State Income) for Jumbo Loans, if they exist are more expensive.

Timing is Everything.

Meyerson warned a homeowner cannot expect a quick turnaround and needs to have a strategy for the transition period from the time of sale to the time of purchase. This could take many months of being homeless.  He recommended selling a home first, then looking for a home to buy, and be prepared to be homeless for a number of months after you sell, living with relatives, at a hotel, or renting another home. He warned that finding a house you want first and going to contract can lead to “financial suicide” in today’s market because you may end up carrying two mortgages.

Gone are the sell-in-the-morning, buy-in-the afternoon days, Meyerson said.

He said the first-time buyer of a home has to have good credit, but better ‘good credit’ than previously. He noted that the first-time buyer needed to keep his credit card debt below 50% of the credit card maximum credit lines. Bills have to have a history of being paid promptly. He is looking for credit scores of 660. Some loans can be written as low as 580.

The DEBT Ratio: PITI

Another factor in landing a mortgage, is  the Debt to Income ratio:   PITI is  the total of  Principal, Interest, Taxes and Insurance.  When you compare PITI  to Income. the ratio should be no higher than 33%.  When you add in the existing borrowers debt into the ratio Meyerson said ideally lenders want this ratio to be under 45% of total income.

First Home Seekers

Meyerson advised those seeking a first home in White Plains should consider a condominium or coop first, then move up to a house as a second step. (Taxes are less, and credit history is created.) Meyerson said White Plains condos and coops are coming back and will come back more, and are available for less than a decent house in White Plains.

He pointed out that a decent house in White Plains starts at the $600,000 range, “and that is not a starter house.”  He said, “I am still in my starter house.”

Preparing for that First Buy

Meyerson said his firm Wachovia is making loans but as noted previously, credit standards are higher. He encouraged paying down debt before taking on a first mortgage, and to pay as much down on a first home as possible. He did not advise a commitment that placed too great a burden on the owner, and not to overextend themselves.

Foreclosures and White Plains

Meyerson said in his experience in White Plains he has not had a foreclosure in 13 years. He said he did not particularly see the sub-prime loan crisis as a vexing problem in White Plains, because of the topping out of home prices in White Plains staying relatively stable – and that the values are not declining substantially.

He said the financial problem occurs (foreclosure) when a borrower is in the subprime level of mortgages.  Normally in a variable-rate mortgage that the homeowner can no longer afford. These loans become unaffordable when they start to adjust past the initial fixed rate period of 2 to 3 years.  Many of these mortgages start out when a borrower comes to a mortgage broker and wants to purchase a home with no money down and has to finance the closing costs into the mortgage. 

From day one they are 6% under water. 

The borrowers are normally put into a 2 or 3 year adjustable mortgage with the instructions to fix or keep their credit scores in good shape.  The borrower also hopes that home prices will continue to appreciate. 

 The perfect storm hits when the adjustable mortgage starts to adjust to levels the borrower can no longer afford.  In today’s real estate market many home prices have dropped 10 to 30% and if the lending institution could find another mortgage for the borrower they would not have the capital to make up for the new lending values on the home. 

Most people also have not heeded the credit warnings and have not kept their credit scores up to the new requirements.  In the end the borrower with no equity in the home becomes a victim of foreclosure.  

Meyerson does not see this as likely to happen in White Plains.  Loss of income to pay a mortgage due to job layoff or outside circumstances of course, is a different matter, WPCNR notes.

White Plains Property Taxes and the Market

Asked if property taxes in White Plains were a problem for persons who own in White Plains, Meyerson offered the opinion that the city, county and school taxes were high, (about $13,000 for a median home -- $700,000, WPCNR notes),  but relative to other communities, taxes are not as high and that White Plains is a "stable market," that is attractive with good schools.

Meyerson has suggested to the City of White Plains a plan that would defer tax increases on homes owned by seniors, and treating a percentage of increased taxes as liens on the property due at the time of sale. He feels this would insulate the homeowner on a fixed income, from the steady 7% a year increase the city has been seeing in its property taxes from school, city and county tax.

Selling

He said that persons wanting to sell their home have to first present their homes well: sprucing up the exterior, removing "clutter decorating"  from the interior, and repainting the interiors if needed, and executing repairs. (WPCNR is taking notes.)

Talking with Mr. Meyerson, it seems as if nothing has really changed in 40 years.  Houses were always impossible to afford for the starting out couple.

If you have a good house to sell you can sell it. If you want to buy a home, condo or coop for the first time on a mortgage, you have to make a sacrifice: get your debt down, save money, and show good or better  credit history and management. You simply have to make your numbers better to the lender.  There is no shortcut to your dreams. It is hard work. Hard choices. Sacrifice.

And as far as overly attractive mortgages are concerned,  Alicia Nugent's song says, "If it sounds too good to be true. It probably is."