To understand how the credit crisis is hitting home in South Florida, consider the plight of Teresa and Hoover Encalada. The couple found a two-bedroom condo they loved at the Plaza on Brickell. At $434,000, the price was right. Their credit was good.
Friday, they got the bad news: The lender wants 45 percent down on a five-year loan with an initial interest rate of 7.8 percent. Now Encalada, a 39-year-old administrative assistant, and her husband, an Ecuadorean banana grower, are waiting on a second bank offer requiring only 40 percent down before they proceed.
Existing home prices in South Florida have fallen 20 to 30 percent over the past year, putting once-unaffordable homes within the grasp of buyers -- if only they could qualify for a loan at reasonable rates.
Credit markets have gotten so tight that in many cases it is impossible to qualify for a loan with less than 20 percent down. Compounding the problems of financing, especially with condos, is the dearth of PMI, or private mortgage insurance, which is required for down payments below 20 percent.
''For every broker and developer, the biggest issue in 2008 is a lack of mortgage financing. The pendulum has swung this year to the other side: No mortgages to anybody, unless they're Boy Scouts and Girl Scouts,'' said Craig Studnicky, president of International Sales Group, an Aventura firm that specializes in marketing new condos.
The Encaladas thought they'd have no problem. At most they planned to put 30 percent down, leaving enough money to buy new furniture. ''Now, I can only get the place,'' Teresa Encalada said. ``Furniture and improvements will just have to wait.''
Gone are the days of easy credit. With home values on the slide and new capital tight, lenders are sometimes asking for extraordinary terms.
Last week there was a ray of hope in the troubled South Florida housing market when August sales figures were released. Sales of existing single-family home rose 22 percent in Miami-Dade and 12 percent in Broward -- albeit from very small bases a year ago. Meanwhile, condo sales rose 13 percent in Miami-Dade and stood flat in Broward.
But real estate and mortgage brokers say those sales numbers would be far higher -- if would-be buyers could just get a loan.
It's a far cry from the go-go days of 2004 and 2005, when mortgage lenders were doling out cheap loans with no down payment and no credit checks -- the kind of deals that often have gone sour, spreading chaos throughout financial institutions in the United States and around the globe.
TOUGH LIMITS
Now even solid borrowers are facing stiff guidelines. Lenders want buyers to put some skin in the game, and with home prices in many markets still sliding, they want an extra safety margin. The problem is exacerbated by the billions of dollars in ailing mortgage securities on the balance sheets of many financial institutions that hamper their ability to offer new loans.
Real estate brokers, developers, and mortgage brokerages are watching closely as the Bush administration and Congress hammer out a $700 billion bailout plan with hopes it will stabilize U.S. banks so they can keep extending credit to businesses, home buyers and other individuals to keep the economy flowing.
E-Mail
Print
@Nyx.CommentBody@