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Credit Unions Prepare for Robust Home Buying Season

Credit Unions Prepare for Robust Home Buying Season

Just when you thought the days of home sale bidding wars were gone, they’re back! Credit unions and Realtors across the country report that home buying activity has kicked into high gear with buyers trying to snap up properties before rates and prices increase.

“The housing market is seeing an uptick,” explains Sharon McLennon, broker at Splendor Realty, Inc. in Plantation, Florida. “Interest rates are at historical lows and there is a shortage of inventory especially at the lower price points (under $250k). The shortage is creating bidding wars and buyers bidding over list price to be able to get the properties. If the inventory levels remain low, we will see a continued increase in prices.”

McLennon, who has been working in what’s considered to be one of the “ground zero” housing bust areas in the country says that the outlook is cautiously optimistic.

The Commerce Department reports that new home sales increased 3.3%, with home resales hitting a two year high. Additionally, the new home median price increased by 4.9% from a year ago (to $235,700).

Home builder giant, Toll Brothers, Inc. reported a higher than anticipated profit and increase in new orders. "The spring selling season has been the most robust and sustained since the downturn began," Chief Executive Douglas Yearley said in a statement.

New home sale increases could not only signal a newfound appetite for home buying, but also the beginning of a true economic recovery. "As sales pick up, we should start seeing better levels of starts and that would mean more construction jobs," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

"Nevertheless, with the all-clear sign on foreclosures now out, the pressure on the newly built portion of the market will remain high for a long time."

Credit Unions Reboot Construction Lending

Recognizing that new home building is revving up again, Arizona State Credit Union ($1.3 billion, Phoenix, AZ) refocused attention on its construction lending program. Phoenix housing expert RL Brown says that the market experienced a 27% increase in new home sales in March. The spike may have been just what the credit union needed to redirect its focus on its construction loan program.

“We offered construction loans in the past, but the collapse of new home building in Arizona during the height of the recession caused us to pull back from construction lending,” says Jordan Masi, marketing specialist. “We are now seeing signs of a recovery in new home building and we want to be ready to meet that need.”

Masi explains that interest in the credit union’s construction loan program comes from a variety of sources, but has seen many members seek loans to build homes on land purchases made pre-recession. “Most of the need for construction is fueled by individuals who may have already purchased a piece of land, but because of the recession, made the decision to hold off on building the house,” she says. “Now that the economy is improving and the resale market has improved, they want to move forward with their plans.”

Although some credit unions may be considering construction loans as each area of the country recovers, Arizona State is one of the few offering this product in its market right now.

“Most lenders have ended construction lending and I am not aware of any other credit unions offering this product,” Masi says. “As construction begins again, I am sure more will enter the market. Our product is unique because it offers a construction loan that can be converted to permanent financing in one easy process. It is not only good timing, but the right product for members who are now ready to build.”

Existing Home Sales Build in Credit Union Pipelines

In addition to building new homes, members appear to be ready to buy (and continue to refinance) an existing home as well. Masi reports a strong increase in overall activity since the end of last year.

“We have been very busy since the start of the fourth quarter 2011,” she says. “2012 has been just as busy with a total pipeline of about $110 million and May closing expected to be near $50 million. Much of our business is refinance; however, the purchase business has been growing and the interest in construction is part of that.”

“Prices are inching up a little and we have seen several sellers field multiple offers on the same property,” says Joanie Howland, mortgage loan officer at Highmark Federal Credit Union ($85 million, Rapid City, SD). “It’s been a few years since we’ve experienced anything like that--it’s very exciting.”

Howland says that the credit union also performed numerous refinances over the winter months. “However the tables have turned and purchases are exceeding the refinances,” she says.

With home sale revitalization on the rise, Howland says that the credit union continues to raise awareness about the benefits a credit union mortgage can deliver.

“We had a few members finally close on their home after working with them for over a year,” she says. “We helped them rebuild their credit and were by their side throughout the process. There’s a lot of satisfaction when you finally see a positive result after working so hard to help someone achieve their dream of home ownership.”

She refers to another couple who were able to save $450 a month after refinancing through the credit union. “It’s an exciting time and great to see the market finally turning around,” Howland says. “Whether refinancing or buying, it’s nice to see people save money.”

Howland adds that Highmark also offers construction loans. “That area of lending is increasing as well. It’s the time of year when people are more likely to build and we’re receiving an increase in inquires this year.”

Masi says that Arizona State has also been able to save its members a decent chunk of change. “A current member was about to short sale her property. Arizona State Credit Union would have been at a loss of $423k; however, with the help of our port plus refinance program she was able to keep her home and save close to $480 dollars a month!”

In another instance Masi states that a non-member sought the credit union’s help after abandoning her current lender. “A non-member called in looking for anyone other than her current lender to help. She had been working with this lender for weeks, with no avail. Arizona State Credit Union was able to refinance her and save her close to $560 a month.”

Stories of savings must be spreading like wildfire as The Washington Post recently reported that credit union loan originations hit its highest volume in five years.

First quarter data collected from Callahan & Associates, a credit union analytic provider, reported that loan originations across the country spiked 25% with mortgages leading the increase.

According to Lydia Cole, director of industry analysis at Callahan, mortgage refinance continues to be hot across the board. “Everyone we talk to in the industry says this is going to be the last refi boom, but it keeps going,” she said.

The Mortgage Bankers Association says that lenders are seeing an increase in activity due to buyers wanting to lock in low interest rates.

We’re definitely seeing more interest this year versus last year,” says Howland. “People are more comfortable with their jobs, which is helping to increase homebuyer confidence.”

Experts predict that both rates and prices will continue to rise. Find a credit union today to lock in a historically low rate.



By Gina Ragusa
Published May 30, 2012
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