50-Year Mortgage a Penny Saver?

A reader noticed this ad in a local PennySaver. Is this a sign of the end of the housing boom or is this the beginning of a brave new world of multi-generational mortgages?

"Low monthly payments you really can afford your dream home!"

The drying up of mortgage business has caught the attention of the press in Stockton and Modesto.

From the Modesto Bee:

In Modesto and nationwide, mortgage companies are reporting a downturn in refinancing that they attribute to several things. "It's kind of like the gold rush," said Robert Ivan, president of America One Mortgage and Financial Services of Modesto. "This area boomed for five years," he said. "When that happens, you do have more (businesses) coming into the marketplace and trying to get into mortgages." As a result, he said, there are too many companies trying to dip into a shrinking pool of refinancing homeowners.

Higher interest rates also are having an effect, said Patrick Payan, branch manager at American Residential Mortgage in Modesto. Those rates make it less attractive to refinance, in addition to scaring off home buyers, he said.

And slower home sales have an effect, slowing the growth of prices and appreciation. That means there's less equity for a homeowner to draw from by refinancing, Payan said. "That's got to have some kind of effect on the economy," he said. When the market was hot, many people used their homes as wood-and-stucco cash machines, using equity to undertake remodeling, pay off credit cards or make other purchases...

Ivan of America One said the refinancing market could remain quiet for two other reasons. With too many brokerages and too little business, he said, it will take a shakeout to bring balance back to the industry.

From the Stockton Record:

Overall, mortgage volume has plummeted to half that of last year and the year before, he [Tom Cole, senior loan consultant in the Stockton office of Washington Mutual] said, but it's still very healthy, because the previous six years in the residential market were just phenomenal. "We're falling back into a typical market, and that's still fine," Cole said. "The last five years was an anomaly. So now, my business is falling back to a normal volume."

A market so "healthy," that Stockton Washington Mutual recently pink-slipped 100 employees.

Jerry Abbott, president and co-owner of Coldwell Banker Grupe, is convinced that rising interest rates have slowed sales of existing homes as more and more people get priced out of the market. Primarily, steady increases in the number of homes for sale in San Joaquin County since summer has laid heavy pressure on prices and turned the scene from a seller's market to a buyer's market, he said. According to new figures in the latest Coldwell Banker Grupe-TrendGraphix monthly sales report, based on Multiple Listing Service data, sales in San Joaquin County slipped from 374 in January to 350 last month.

Even though homes on average sold at 99 percent of initial asking prices, the report indicated, the median sales price also slid from $410,000 to $396,000 in the same span.

That's unusual, Abbott said. "A lot of people are trying to characterize this by saying we're going to a normal market, but I don't think anybody knows what a normal market is," he said. "In a nutshell, it's still supply and demand, and right now, supply exceeds demand. That's just a truth you can't ignore....Plus, I think people are more cautious right now about the marketplace, because it's hard to figure out whether the prices are going to go up or go down."

Kevin Sanguinetti, president of First American Title of Stockton, said volume at his business is way off, as it is countywide. For example, resales countywide stood at 787 in January, compared with 1,021 the previous January, he said, and refinances also dropped, standing at 3,224 in January versus 3,748 the previous January. "In August, things kind of peaked, and they have dropped since then."