The P.A.

A weekly address from Patrick Adams,
President of St. Louis Community Credit Union

Stable Community Needs Stable Housing Market

On November 21st, 2011, posted in: Uncategorized by

All kidding aside, the housing market needs a shot of adrenaline.  Because housing sales serves as the pebble in the pond and creates countless ripples to either positively or negatively impact the economy, it just makes sense that we need to jumpstart people buying houses.

Think about a few of the ripples.  You can’t move old furniture into a new house.  So the purchase of a couple of rooms of furniture serves to bolster that industry.  Likewise, the window treatments in the old house will have to stay, thus new shutters, drapes, blinds, sheers, etc., etc. are needed for sure.  You’ll need an alarm system, carpet (or at least a half-dozen throw rugs) and, without question, the bed spread has to match the curtains.  I had somebody once tell me after buying a new house that they needed a new car.  After all, you can’t have an old car parked in a brand new garage.  I’m not kidding!

It should be pretty obvious that if we can get housing going, employment numbers will improve.  This economic recession that officially ended in June of 2009 (that sound you hear is me sneering at one of the great miscalculations of our time), has been called a “Mancession.”  Why?  Because so many of the unemployed are men.  Why?  Because they work in construction and construction-related industries.  So, if they’re not working, they’re not buying work boots, clothes, tools, hard hats, lunch meat, beer or Slim Jims.  Let’s get these guys back to work NOW for the sake of Red Wing, Dickeys and convenience stores everywhere.

The problem is at the lender level – well, kind of.  Lenders are not making enough loans, even though most of us are flush with liquidity.  That’s “financial speak” for having plenty of money to lend.  So what’s up?

The pendulum has swung all the way from the “housing bubble” loans of a few years back that were made to people with no income, no job and no assets, to now requiring creditworthiness somewhere north of a median score of 750 – otherwise your chance of getting a loan is limited.  Add to it the fact that appraisers are low-balling house values (to compensate for their past mistakes).  Also, since houses aren’t selling, there are no comparable property sales for the appraisers to determine values.  Bank regulators are also watching carefully.  All in all, the constriction to lending money is serving to choke off growth.  It’s no one entity’s fault…it’s a “perfect storm” of obstacles.

A primary reason for tight lending hinges on the fear that loans will not be repaid.  You’ve heard of Fannie Mae and Freddie Mac.  They are the entities where all of the financial services industry sells their loans.  Well, if the loans are not perfect, these government agencies are sending the loans back to the financial institution that made these stinkers to begin with.  As you might imagine, the risk of taking back one loan can wipe out a profit on dozens of good loans.  The result:  everybody’s running scared.

We’re trying to buck the trend here at St. Louis Community Credit Union.  Call us first.  Maybe we can do something where others could not.  After all, a stable community desperately needs a stable housing market.

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