Where has all the money gone???
Back in December of 2008 congress acted swiftly to assure that moneys were available for Banks and lending institutions to allow the American people to secure mortgages. Sooo why is it so difficult to obtain these funds? Steamboat Springs Colorado is facing the same issues and problems that all other resort towns across the nation are facing. It seems like the lenders are making it as difficult as possible to pry the dollars out of their hands.
As is generally the rule of the pendulum the availability and rules to obtain funds has swung from one extreme to the other. Even one short year ago it was very easy and straightforward to obtain a loan and with historically low interest rates. Ever since the housing crisis (how can there be a crisis with less than 4% of the homes in the United States facing foreclosure?) many of the rules have changed.
One market segment in Steamboat Springs that is bearing the adverse affects is the Condominium market. Condominiums are America’s second homes. They are used for vacations and retreats and holidays as a specific place that the entire family loves to gather and enjoy. What a wonderful concept to purchase a secondary home and have someone manage all of the details like transportation to the ski area, cleaning and heating the swimming pool, cutting the grass, booking a nice dinner out for the family. All you had to do was show up check in at the front desk conveniently located on site. As an extra bonus, if you were not using the unit the Management Company could rent it out to guests and you would end up with about half of that rental fee. Suddenly this wonderful concept has become a burden. For some inexplicable reason lenders are no longer making money available for this market segment. So the question is why? Were there more condos that faced foreclosure than single family homes? Absolutely not! In fact HUD reports that less than 1% of condominiums are in foreclosure. So what gives?
The best explanation that I have heard is that the lenders are anticipating that if an owner is facing a financial crisis they will naturally allow the condominium to go into foreclosure prior to their primary home. Although the concept has some logic to it, the foundation is not based in fact. This has, currently, not proven to be the case and if there is someone who is facing a possible foreclosure the banks are making it impossible for the person to sell because whoever wishes to purchase the property CAN’T GET FINANCING!
Loan underwriters are now using the “Google” rule which means if they can find a nightly rental in a complex by “Googleing” that complex it will be considered a Condo-Tel and lenders are not making loans to Condo-Tels. We have several complexes in the Steamboat Springs Mountain area where the vast majority of owners are full time residents and work in the community and raise families. Unfortunately if an underwriter can find even one unit that offers nightly rental they often will reject the loan request.
The silver lining is that this will have to be corrected at some point as the pendulum moves back to center. This also means that sellers are motivated to look at all offers including the possibility of owner financing.
