It used to be that there was logic applied in the world of mortgage lending. An appraiser determined the value of a home by the axiom, “what a reasonable buyer would pay a reasonable seller”. An underwriter weighed the plusses and minuses of a file (after analyzing the income, the assets, the credit profile and the appraisal) and made a judgment call based on their experience.

Loans with sizable down payments used to be more flexible with how income was documented or what quality of credit was required. Even the decision of what made up “good credit” has been reduced to a FICO score. Determining the risk of a loan affected its approval or denial. Further, loans deemed riskier were given less favorable terms (higher rates and/or costs or larger down payments).

But today, everyone has tried to quantify everything and put everything into a matrix. Credit scores are numerical, and the number determines eligibility and cost. Gone is the concept of explaining why you have defects in your credit. We don’t care why, we just look at your score. Appraisers now are being scored and their data being scrutinized to a level most would find mind-boggling. Amenities that make a home worth more for a particular buyer (like a pool or upgraded basement) are virtually ignored. Underwriters have primarily become fact-checkers and quality control as a computer software program underwrites the vast majority of mortgages today.

Gone is common sense. It has been replaced by numerical formulas and a cover-my-behind, justify-everything-with-data mentality. Basically, the pendulum has swung too far. It used to be that lending was too easy (see the subprime debacle), but now we have eliminated too much of the human element. We need common sense back.

People who have saved 30% for a down payment know what they can afford monthly. Don’t they?

People who had a medical challenge two years ago that is not likely to reappear should not have a twenty year credit history destroyed. Should they?

People aren’t likely to overpay for a home with so much inventory and all the media exposure about falling prices. Are they?

Bring back some common sense when we need it most!

We haven’t heard a lot about inflation recently. However, prices have started to creep upward over the last year. As examples, here are a few categories that increased from November 2010 to November 2011:

• Food at home – up 6.2%
• Housing fuels and utilities – up 3.5%
• Transportation – up 9.2%

Today, we want to address the issue of inflation and the advantages of owning real estate. The National Association of Realtors (NAR) took an historic look at the impact of inflation. Here are some inflation numbers over the past 30 years:

 We can see that real estate has fared very well. The most important number is the $0 increase in mortgage amount. The study assumed that the homeowner took a 30 year fixed rate mortgage thereby locking in the housing expense for the thirty years.

NAR then looked at inflation moving forward over the next thirty years. Obviously, if it remained the same as the last thirty years the percentage increase would be the same. They looked at a low inflation scenario and a high inflation scenario. The graph below shows the findings:

BOttom Line

We can lock in the housing costs of our primary residences and vacation homes at all time lows if we purchase today. Either would be a great hedge against future inflation.

Mortgage Rates Slowly Moving Up Freddie Mac released its Primary Mortgage Market Survey detailing that mortgage rates remain near historic lows. The 30-year fixed-rate mortgage (FRM) averaged 4.00%, up from last week when it averaged 3.98%. This marked the fifth consecutive week that the 30-year rate has averaged at or below 4.0%. Last year at this time, the 30-year FRM averaged 4.46%. The 15-year FRM remained unchanged this week averaging 3.30%. One year ago at this time, the 15-year FRM averaged 3.81%. “Mortgage rates were little changed this past week,” said Frank Nothaft, Freddie Mac Vice President and Chief Economist. “The extraordinarily low mortgage rates of the past month may provide a needed spur to housing activity.” Nothaft noted that economic data released this week hinted at positive economic movement. The consumer confidence index saw its largest jump in November since April 2003. Pending home sales increased by 10.4% in October, registering the strongest pace since November 2010. The money market fund finished this week at 0.50%. The 1-year CD finished at 0.70%.

View the entire article and photos at: http://soapboxmedia.com/features/112911stanthony.aspx

Condo conversion: Bellevue church attracts suburban buyers

The resurrection of the second Catholic parish in Bellevue, Kentucky, has turned one defunct but architecturally stunning space into five fast-selling condominiums.

The history of the St. Anthony Lofts on Poplar Street dates back to 1889, when the church first opened. More than 100 years later, in 2003, St. Anthony Church held its last mass. In 2009, Ashley Commercial Group took a chance on transforming the space into five condos. Units were ready for occupancy this September.

Condo layouts highlight the history of the building. Living spaces include original stained glass, 50-foot vaulted ceilings with original tresses and choirboy’s robe lockers transformed into bookshelves.

A combination of a prime location and unparalleled architectural details have helped the lofts’ sales record so far. Priced in the mid $200,000s, three of the condos are sold and Lisa Dunhouse, Realtor for Comey & Shepherd, and has gotten much more interest in the remaining two condos after she had a photographer come in.

“This is a very unique creature,” Dunhouse says. “We have a couple different things going for us. The community in Bellevue is very active and the condos are a great value.”

The price per square foot is on the low end of condo prices, but offers a high-end finished quality. Dunhouse has been working on the St. Anthony Lofts since its inception two years ago and had to make two presales to secure funding for the condos to be finished. This had to be done with only an empty church and virtual renderings.

Dan Kroger, an optometrist with his own practice in West Chester, purchased the first condo. Kroger had been looking for condos nearer to downtown Cincinnati and places like the Aronoff Theatre. He first visited St. Anthony when it was still a vacant church with no dividing walls plenty of room for renovation. Still, Kroger had faith the space would be transformed into the home of his dreams.

To make the sale happen, Kroger had to sell his single-family home in West Chester in a bad market and move away from his office. He now has a 30-minute commute to work each day. He says it is a small price to pay to be close to an energetic city. “I found myself driving downtown more often that I stayed in West Chester,” Kroger says. “It seemed like the right move to be closer to downtown.”

Friends and family questioned his decision, but after seeing his new space in Bellevue, they quickly changed their tunes.

“People ask me to show them pictures,” Kroger says. “I do, but it doesn’t do it justice.”

As the first buyer, he got first pick of the entire building. He chose the back of the church, where the altar and stage used to be. Massive stained glass windows of Jesus, Mary and priests let light in; the confessional light notifies people the bathroom is occupied; the hanging lights are adorned with crosses; and the old church safe is now a wine rack.

The mixing of contemporary loft design with the uncommon opportunity of living in an old church appealed to the Ashley Commercial Group. “It seemed like the best use for the area,” says Bill Kreutzjans, partner at ACG. “Several of the partners thought it would be a good use of the building.”

Roger Martin, another St. Anthony Loft owner, had been looking for a downtown living space despite his job in Fairfield. He first saw an ad online for the St. Anthony Lofts after his Liberty Township house was already up for sale. “I was looking to downsize from a home,” he says. “I was over the whole thing, and I wanted to be in a more urban setting near downtown Cincinnati.”

Martin had toured spaces in the OTR’s Gateway District, downtown and in Covington, but nothing clicked until he saw the St. Anthony Lofts. As an assistant superintendant for the Fairfield City School District, Martin, like Kroger, didn’t mind the reverse commute. It’s a small price to pay for proximity to downtown entertainment and restaurants, as well as sports stadia and parks.

“I like the diversity that downtown offers,” Martin says. “I hoped I would be in walking distance to Great American Ball Park. I don’t know if I can quite walk there, but it’s still close.”

That walkability and accesibility is one of the selling points Dunhouse has used all along.

“It’s very walkable,” Dunhouse says. “That seems to be something people that are moving from the suburbs are looking for.”

By Evan Wallis (Follow him on Twitter)
Photos by Scott Beseler