Staying in the game
While negative news about the housing market has spooked some potential homebuyers, the real estate picture in Tulsa remains fairly rosy. Local experts weigh in.
Any way you slice it, news reported about the housing market looks dismal.
Except it’s not.
Not in Tulsa, anyway.
Last October, Forbes Magazine selected Tulsa as the fifth-best city in the country to ride out the recession, going on to say that the city is forecasted to be the fifth-strongest market for residential real estate in the nation through the third quarter of 2009.
Plus, MSN Real Estate ranked Tulsa as the ninth most livable city in terms of best bargains for real estate. This past January, Forbes Magazine again listed both Tulsa and its turnpike sister, Oklahoma City, among America’s 25 Strongest Housing Markets — predicting just a 1.1 percent price adjustment this year.
Additionally, a report by the real estate data service RealtyTrac shows the number of home foreclosures fell in Oklahoma by 23.4 percent in January. The foreclosure rate for Oklahoma is now one for every 1,688 homes, compared with a national rate of one for every 466 homes.
So, why all the doom and gloom, when it seems Tulsa is just about the best place to be if you want to buy, sell or build?
“Certainly Oklahoma is one of the leaders in the nation for the home building and mortgage industry right now because we don’t have some of the problems seen in other parts of the country,” says Bill Cassetty, 2009 Oklahoma State Home Builders Association (HBA) president. “But homebuyers seem to have a perception problem.”
Cassetty says it’s the national mortgage picture — states reporting record foreclosures, tight mortgage environments and extraordinary amounts of home deflation — that is making Oklahomans leery of entering the current housing market. To change this, Cassetty and the Oklahoma HBA are working with state leaders to promote what he sees as a positive location to be a builder or lender right now. He also is working with the state Legislature to promote positive legislation for Oklahomans.
“Oklahoma is OK; this is the place to be,” he says. “If we can restore consumer confidence, this may turn around in this coming year. Our primary focus to date is to get the state leaders — the lenders, mortgage companies, builders — to promote a positive image for Oklahoma.
“It’s time to roll up our sleeves and work hard and promote the positive news in Oklahoma.”
It’s not all PR and glowing news releases either. Oklahoma didn’t see the dramatic swings in home prices or the high level of subprime lending that other states saw in the earlier part of the decade.
“Many lenders were chasing higher profit margins with subprime loans,” says Ben Cowen, Bank of Oklahoma Mortgage president. “BOk Mortgage never got heavily involved in subprime lending because we could not get comfortable with the credit risk. BOk Mortgage never placed any subprime loans on its books.”
In addition to Oklahoma-based banks playing it safe, Tulsa’s home values — in sharp contrast to many places in the country — actually rose in 2008. Home Builders Association of Greater Tulsa data on the Tulsa market show that home values increased slightly in 2008 versus a national decline of 8.6 percent.
“So, Tulsa home values thus far are faring very well,” Cowen says.
Cowen says Tulsa housing is very affordable compared to the rest of the country, where the naional average home sales price is $243,100 versus the Tulsa average of $147,118.
“Values seem to be holding steady,” he says.
What to buy
It seems experts agree that Tulsa is holding up well, compared to the rest of the nation, on home values and foreclosure rates. But what are Tulsans buying? Has all this national scare dried up home starts for Green Country? Are those McMansions dotting south Tulsa’s landscape starting to sit empty?
Well, yes and no, it seems.
“We haven’t had to lower prices to sell homes, which is really encouraging,” Cassetty says. “In fact, I know one Tulsa company that had record sales in November and December.”
Cassetty says lower-priced homes, $300,000 or less, have stayed consistent. However, the upper end of the price range — $600,000 or more — is saturated with homes, as buyers are reluctant to purchase in hopes of getting a bargain. Homes in this market are selling, although slowly.
“I think the upper end of the market is saturated with products, and people are seeing how much of a bargain they can get,” he says.
More homes are sitting on the market longer, creating a surplus of available homes in the Tulsa metro area. In fact, this increase in inventory has led to housing permits for metro Tulsa falling by 29 percent in December 2008 from the previous month, according to the Home Builders Association of Greater Tulsa. In addition, the total number of home starts for 2008 decreased by 37 percent from 2007.
“Tulsa is a little bit overbuilt,” says Bob David, owner and managing partner of Leadership Properties. “There are probably some projects that got built that maybe were rushed. But we don’t have a huge supply. I think our community is very measured. You look at Northwest Arkansas, and they have probably eight to 10 years worth of lots to sell. Tulsa maybe has two years. Based on historical information, we are not way overbuilt, in terms of lots.”
David says the oversupply of homes is as much due to reduced demand as a result of financial markets as it is to the actual supply of homes. However, it will lead to reduced home prices — good news for potential homebuyers.
“When the market has too much supply, you are going to see prices go down,” he says. “I don’t see prices dropping dramatically, though. There are some pretty good deals out there right now.”
Rodger Erker, McGraw Realtors midtown manager/broker, says while there is an abundance of inventory in the market right now, new homes remain a popular option for homebuyers. In contrast, he says older homes have to be in pristine condition to be of interest to most buyers.
“Buyers are just too busy anymore,” he says. “They don’t have time to go into a house and completely redo it. If you have a 5,000-square-foot house with old carpet and dingy wallpaper, be prepared to discount.”
Kasia Dupler, a real estate agent with Keller Williams Realty, says that in Tulsa, price ranges aren’t as important as zip codes and school districts. She says places such as Maple Ridge or Brookside, specific school districts including Jenks and Union or even specific schools such as Carnegie Elementary top many buyers’ want lists. In addition, she says buyers are looking into new eco-amenities available in the homes.
“We are definitely seeing a move towards eco-friendliness or consciousness like using ‘green’ paint, natural material flooring and recycled materials in construction, but there is a limit to what’s available today,” she says. “Insulation and energy efficiency is also a request.”
She says modern amenities found in homes over the last decade are still in demand.
“Typically, a clean, well-maintained house, with some updates like new appliances, countertops, hardware and light fixtures, is always very appealing,” she says. “In midtown, an updated kitchen, new windows, updated bathrooms or possibility for updating is appealing because of the location.
“In newer homes, square footage, garage size, number of bedrooms and configuration, as well as bathrooms, can make or break a house or floor plan.”
How to buy
Overall, Tulsa’s in good shape, with many homes available for those who need them. It’s even a bit overbuilt, so home seekers will probably get a good deal. However, lending requirements never have been tighter. What can people do to get the mortgage loan they need these days?
First, the good news: Mortgage interest rates have fallen to their lowest point in more than 30 years. Lower interest rates can dramatically affect the final monthly payment on a mortgage loan, creating a larger price bracket for potential homebuyers to secure a home.
“With historically low rates and reasonable prices here in Tulsa, this is a great time for customers to achieve homeownership in a way that is sustainable for the long term,” says Shawn Karnes, Wells Fargo Home Mortgage Northeastern Oklahoma manager.
Lower rates are making homeownership a possibility for some first-time buyers, and are opening up a flood of current homeowners refinancing their mortgages.
BOk Mortgage’s Cowen says many people who bought their homes in recent years are holding a mortgage with an average interest rate of 6 percent. With interest rates hovering at around 5.25 percent, homeowners could save significant money off their monthly mortgage payment.
“There is a tremendous number of borrowers that can benefit by refinancing,” he says. “The number of refinance applications at BOk Mortgage has soared, and we are expecting to fund a record number of mortgage closings in the next 60 days.”
Interest rates are predicted to stay low for the foreseeable future. However, Jack Kirkpatrick, Guaranty Abstract Co. chairman and CEO, warns against waiting for rates to go lower.
“Don’t be paralyzed with uncertainty,” he says. “No one can predict what the future holds, but the current conditions are wonderful. We are experiencing very low interest rates and stable home prices in Tulsa.
“Don’t wait for interest rates to go to 4 percent. It probably won’t happen and the low rates will pass you by.”
And here’s the bad news: Before the mortgage meltdown of 2008, people with less-than-perfect credit could get approved for home loans through various types of programs and loan structures. Today, those people with low credit ratings and even first-time homebuyers are finding it harder — or flat impossible — to get approved for a home loan.
“First-time homebuyers and those with less-than-good credit scores will find it very difficult to finance home purchases,” Kirkpatrick says. “Special programs available in2003-2007 are long gone.”
Kirkpatrick says customers in need of credit help can “get counseling to set a plan of action to improve scores.” However, he says improving credit scores is the first step, because he doesn’t see lending restrictions loosening anytime soon.
“Poor credit will continue to be an inhibiting factor in the future,” he says. “The days of subprime mortgages are gone.”
Wells Fargo’s Karnes recommends that first-time homebuyers or those with less upfront cash research Federal Housing Administration loans.
“In the current market, a number of customers who may have once considered a subprime mortgage are finding success with FHA loans, due to low down-payment requirements,” he says.
Cowen says that while Tulsa isn’t in bad shape, these efforts also should help the local market.
“I expect that the federal government’s efforts to turn around our economy will focus on turning around the housing market,” he says. “And, as a result, we will benefit from several different tactics to stimulate our economy through the housing market.”
It sounds like downright good news for Tulsa — stable market, lots of available homes, historically low interest rates.
Bottom line: Turn off the national news and start house hunting.