Have we learned nothing from the Great Recession? Housing appears to be headed down the same road it was in 2006 when “the bubble” burst. I owned a flourishing wholesale mortgage firm for 7 years and wrote loans for over 13 years total. After closing my company in 2009 after seeing that there was no hope in the near future for a turn around and decided to focus on real estate sales only vs doing both I said to myself, “on the bright side we [as a country] have at least learned our lesson”, or so I thought.
I recently read an article in Business Insider called “Something strange is Happening in Housing“, and although most of what was in the article came as no surprise to me because our real estate market here in Charleston SC has been on fire for the last three years more or less, I was however alarmed to read there are banks lending 100% again. San Francisco Federal Credit Union announced a new loan program that will allow San Francisco-area borrowers to finance up to 100% of their mortgage – with no requirement for mortgage insurance – on loans up to $2 million. This is insanity! Jumbo loans at 100% financing! Not to mention it’s call “The Poppy Loan”! They claim it’s an acronym that stands for Proud Ownership Purchase Program for You, to me it’s referencing the poppy the seed, the flowering plant where the drug heroin comes from because you’d have to be on drugs to write this loan. It’s 100% financing loans that got us into this mess in the first place.
Not making borrowers have “skin in the game”, was the entire reason things got completely out of control in the first place. No wonder San Fran has some of the highest housing costs in the entire country. When I started writing mortgages in 1998 the minimum you had to have to buy a house was 10%, and that was with an 80%, and 10% equity line, assuming you had flawless credit. Which is how it should be.
Putting that aside – how do we explain the meteoric rise in real estate prices when we have a stagnant economy (regardless what the white house wants you to believe) with 2% GDP, and incomes that aren’t commiserate with the cost of homes? The article by Morgan Housel points out, San Francisco prices are up 79.2% since 2009. Atlanta is up 53%. Phoenix, up 47.1%. Denver, 42.6%. Los Angeles, 49.7%. The magnitude of these gains rivals what we saw during the nuttiest portions of the 2000’s bubble.
The only thing that does make since is that it says housing prices are up anywhere from 30-70% from 2009 prices. Well duh, that was the lowest of the low in decades. No surprise there. They’re now just 4.5% off their 2006 bubble highs, according to data from respected Yale economist Robert Shiller (no relation): reports the article.
The writer points out his beliefs as to what the culprit is for the unjustified boom in housing prices, and I can’t say as I disagree, because I watched it happen myself. For example in 2013 DR Horton released news of its largest development in the United States, Oyster Point right here in Charleston’s suburban community Mount Pleasant. As I met with clients and the listing agents at the new community we were informed that the builder DR Horton was temporarily freezing contracts and although they claimed it was to “slow down the growth” because it they couldn’t keep up – it’s hard to say. The writer feels the large national builders were intentionally slowing down building to drive up prices and profits.
Bottom line is, it’s simple economics supply and demand. Mortgage rates were at an all time low for SO long that made housing a little more affordable so people were eager to buy as fast as possible. Home owners who were once struggling and under water were able to refinance and modify their loans and remain in the home. However, weren’t necessarily in a place financially to move because their credit was ruined from the crash so they weren’t selling. Banks had a gluttony of REO properties they were forced to sit on for legals reasons. Who knows if there is any truth to the builders scenario laid out above. Fact is there are many factors in play that have all contributed to the fast rise in real estate prices, but supply and demand will always be the main reason. Nothing other than that.
I bet when you think of San Diego the last thing you think of is Charleston SC. Trust me, I understand why. However, you’d be really surprised at how very similar the two cities really are. Truly. I have lived in Charleston SC since 1999, and am originally from Columbia SC. I have traveled all over this great United States, and honestly there really isn’t much like Charleston SC. I am not being biased I promise. I mean there are some cities that architecturally are very similar like: Wilmington NC, New Orleans LA, and Savannah GA (which might be the closest in a general to a lot of Charleston’s characteristics). That’s about it. After having just left from a visit to San Diego I couldn’t help but think to myself how similar the two cities are in so many ways, and in trying to give the locals of San Diego who have never been to our great city an idea, I couldn’t help but sum it up by saying “it’s kind of the San Diego of the South”. I know you’re say WHAT??!! How is that? I’ll explain, but first you must know that like San Diego, Charleston SC is one of the United States and World’s most renowned destination cites.
Recently my wife and I visited San Diego California for a week long business/vacation get away, and had a most wonderful time. Prior to going my wife did about 5 months worth of internet research on the best dining, things to see and do that San Diego has to offer and it paid off. We had a blast. We went to their amazing zoo (like most people), ate at some of the city’s best restaurants, drank at the most famous bars, took a two hour sailboat tour through the harbor, even did a small biking excursion on Coronado Island to see the famous hotel Coronado.
We met so many kind people, almost everyone we talked to that lived there was very gracious and a pleasure to talk to. Offering suggestions and giving us their thoughts on places to go and see while visiting their great city. We ate some amazing breakfasts at the very well known Hash House– twice because it was so good, had drinks at Cafe 21 in the gas lamp area and met the nicest bartender (thanks Zane), drank craft beers at Ballast Point (had 6 different kind) and spent one morning before breakfast at the farmers market in Little Italy. Dined at The Prep Kitchen (twice that week), had happy hour drinks on top of the 5th Avenue Financial Center at Bertrand at Mister A’s which has the MOST amazing views of the entire city while airplanes fly by you, and raved for the food at Cucina Urbana restaurant. You get the point by now. We had a great time.
I bet you’re thinking let’s get to the nitty gritty as to why you think they’re so similar. I call Charleston SC the “San Diego of the South” for many reasons beyond just being popular tourist cities, but truthfully that does have a lot to do with it.
It should be of no mystery that Charleston SC is one of, if not the most kind hospitable town in America; well at least it was for 13 straight years as voted by the world’s most respected tourism magazines. We found the people we met in San Diego to be so welcoming, kind, and accommodating so much so that it instantly reminded me of home. Unfortunately, we did have an Uber driver (had never even been to S.C.) that made a ignorant “stereotype type” comment about South Carolinians I wasn’t happy about. That’s ok, there’s one in every bunch as they say.
Both San Diego and Charleston South Carolina are coastal cities, with a military base(s) and military life influences to which if you live in a city that has a large military population you’ll understand. Although Charleston SC is considerably smaller it is one of America’s most respected and well known “foodie”, and culinary destination cities according to the most well respected chefs, dining critics and media outlets. As does San Diego. I think it’s safe to say we don’t have near as many eating and drinking establishments as San Diego does, but I wouldn’t be surprised if the Charleston SC tri-county area has as many well publicized restaurants as San Diego.
Both cities also are heavily reliant on tourism for a large portion of their cities revenue streams, and both cities have a very young, “hip”, fun, and diverse population most of which aren’t in fact from the area. Mostly transplants from around the United States and world that made the cities their home after visiting. Charleston unlike any other major city in SC (there are only 3), is mostly comprised of people not from Charleston. Likewise, almost everyone we met who lived in San Diego was not from San Diego. Many people from around the United States have a tendency to want to lump California into the same “stereotype”, as liberal, sometimes weird, and sometimes fake. That maybe the norm for some cities in California, but San Diego does not fit that mold at all. The city makes you feel like you’re in a small normal everyday American town that could be anywhere in the U.S. Our lovely cocktail waitress at Cafe 21 summed it up perfectly when she said that locals characterize San Diego in one sentence, “the biggest small town in America“.
Both areas have beautiful beaches to enjoy, but unlike San Diego one thing we do have they don’t is warm waters to enjoy almost year around whereas you need a wet suit most of the year in almost all of California.
Charleston SC & San Diego are also growing at leaps and bounds as being two of America’s fast growing coastal communities. So if you live in San Diego and want to go east, Charleston SC will be your best bet for reminding you of home. If you live in Charleston South Carolina and have need to go west, and want the same feel that only Charleston SC gives you look no further than San Diego. You’ll be pleasantly surprised.
There is NO SUCH THING AS A “FIRST TIME HOME BUYER LOAN”
Caught you off guard huh… Well it is the truth more or less. If you are looking around for the ever present “first time home buyer loan”, then stop wasting your time because you’ll be looking around for ever. There is no such thing.
After having spent over 13 years here the Charleston SC area in the mortgage business as owner and founder of a wholesale mortgage company I should know. If you hear anything about these types of mortgages it’s simply a marketing ploy by mortgage companies to intrigue prospective first time buyers into calling them. Then telling you they have a “deal” for first time home buyers. The actual fact is that it is usually much harder for people who have never owned before, to get a mortgage for their first home. Simply because most people who have never owned a home haven’t established much credit history, savings, or job history to have purchased. Thus their credit profile as it were isn’t established enough to make a bank or mortgage lender, underwriter feel confident they know the commitment it takes to being a home owner.
With the exception of private money not lent by a traditional Federally regulated institution like a bank, credit union, or federally chartered mortgage lending company there are really only a few loans that exist on the market today. Unlike the days of 2000-2006 when there were many different kinds of loans with even more types of terms. What is out there now since the tightening of credit is: Conventional (conforming) loans, government backed loans (FHA, VA, & USDA), and very occasionally state backed mortgage loans. At one point the state of S.C. did have sort of a first time home buyer mortgage loan for what they called “home town heros”. These were specially priced loans with looser requirements, and grant money assistance that was created to give a helping hand to those who served the public like: fire fighters, police officers, teachers, EMS, EMTs, & public safety officers etc. However, that loan is no longer being offered as of now, and there is no word if it will return.
Getting approved for a mortgage loan is sort of a simple thing. Have great credit, have a stable job and/or stable income for at least minimum of 2 years, and save up as much money as you can. PERIOD. That’s really all you need. For more tips on buying your first home click here.