Bryan Sherman is the Senior Vice President and Regional Sales Executive at Bank of America in Dallas. And, for a banker, he’s a pretty funny guy. When I asked him exactly WHAT he does at BofA — I love to give anyone from the Big Three a hard time, because frankly, I prefer smaller local banks and lending institutions — he said, “I’m in charge of all those B of A loan officers running around the street!”
And of course, he’s competition to Well Fargo! Boo-yah!
Bryan tells me that today’s first time home homebuyers are in a better place than their parents ever were. Despite all the ick we slogged through since the financial crisis peaked in mid 2007, the millennials are buying homes and getting mortgages.
“We believe that education is the key to mortgage success,” says Sherman, “and at BofA we are trying to put owners in sustainable home ownership that they can comfortably afford.”
Sustainable is a great buzz word meaning homes they can afford.
As regular readers of this blog know, our market in Dallas has flipped into a seller’s market. The latest Case-Shiller index showed home prices up up up more than 12.2% in May, and Dallas home prices are now 7.6% higher than they were a year ago. I was at a showing recently, and the seller had friends coming over for a glass of wine. All the guests talked about was how they were going to rush home and put their homes on the market, now, too, because values were up and you sell high. Yeah, herd mentality.
So yeah, I said, it may have been a great deal for these kids to buy a home back in the doom and gloom days when President Obama rolled out that first time homebuyer’s tax credit. I know my kids sure took advantage of it, and then just sold that first place and rolled equity over into a second home.
So maybe this market stimulation is coming from some of those buyers, buying up.
“It’s really important that we sit down with clients and educate them about the products out there,” says Sherman. “Every single customer has a unique situation.”
We are still in a full document environment, and every loan depends on the customer’s personal scenario as to whether they should get an ARM or fixed rate product, he says.
Yes, interest rates are rising, but are still at record lows: parents of today’s millennials recall 18% interest rates on homes in the early 1980’s.
“We are nowhere close to that,” says Sherman. Phew!
Interestingly, Freddie Mac economists even declare housing remains affordable. Rates would have to inch up to 7% before housing costs would phase middle class families, says Freddie.
And as he dispels interest rate phobia, Sherman also says that young buyers need to dispel assumptions of the market tightening. Loan products are still available that do not require 20% down. You can buy a $300,000 home for 5% down. Tools developed by B of A hep young buyers learn about the various mortgage products available: the home loan guide and planner.
Another change that may affect the kids: consumers are pulling back from refinancing — so our mortgage market has switched gears from a refi focus to purchase, which may make bankers a little more eager for the business of lending to home buyers if they want any business.
Now this stat surprised me: Millennials tend to like fixer-uppers: A recent NAR (National Association of Realtors) survey says 68% of Americans think now is a good time to buy a home, and 30% of the millennials would prefer a fixer upper over new construction. That’s amazing because I thought this generation had everything DONE for them — ha by us! But 1 in 3 millennials say they would prefer a fixer upper over a house with minimum repairs. They are devouring the FHA 203K product, which allows an individual to purchase a fixer-upper home purchase price plus cost to improve. The home must fit into FHA home limits, which in Dallas is $271,000, limited to the home appraising after completion.
So I guess we needn’t feel too sorry for our kids — they have email, Instagram and are starting life with lower interest rates than we saw! Sherman sees a lot of natural triggers down the pike to keep our Dallas market strong: transplants, home ownership, marriage, divorce, growing a family.
Takeaway: Dallas’ housing values are increasing, making Dallas a prime market for home buyers needing mortgages — yes, getting a loan has sure changed in last few years, but like it or not, the suits are going to have to ease up on lending to qualified home buyers.