Aug. 04--Rising interest rates, a frigid winter and new lending regulations have had a chilling effect on the housing markets in Butler and Warren counties.
Butler County Finance Director Tawana Keels predicted recorder's fees would drop by $400,500 in 2015, but the numbers are looking worse. For the first six months of this year, Recorder Danny Crank has collected $334,679 less than the same time period last year. The same trend is holding true in Warren County, where Recorder Linda Oda's office has seen a drop of $272,643 compared to last year.
Whenever someone buys a new home or refinances an existing mortgage, the documents must be filed with the county recorder. The recorder processes a whole host of documents and collects fees for doing so. Mortgages, deeds, loan satisfactions and transfers make up the bulk of the revenue.
Butler County collected $1.66 million in recorder's fees last year and the prediction for this year was $1.6 million. After six months, Crank has collected $621,079 compared to $955,785 last year. In Warren County, Oda collected $1.3 million last year and budgeted $1.4 million for this year. So far, she has collected $444,554 compared to $717,197 in 2013.
Butler County Administrator Charlie Young said the recorder's fees are obviously not a huge contributor to the $83 million county general fund budget, but any lost revenue is concerning.
"It is bad," he said. "It's not a huge percentage of our budget but still, $400,000 less, $500,000 less, that's a lot of money as tight as we are."
Just about everyone involved in the housing business agrees interest rates are the biggest culprit in document drop. It's not just that interest rates have been edging higher, but the bottom has fallen out of the refinancing market. Bill Kaufman, an attorney who handles real estate transactions and sits on the board of LCNB National Bank, said refinancing is the number one reason real estate transactions are down.
"Interest rates have been so low for such a long time that the refinancing market, while not completely dried up, is substantially dried up," he said. "It's reaching the bottom of the pot. Anybody who was going to refinance, has refinanced for the most part."
Bob Schaad, vice president and mortgage loan manager at National Bank & Trust, said interest rates at their lowest recent rate got down to 3.375 percent for a 30-year fixed rate loan. The rates are up to 4 to 4.25 percent now. He said three or four years ago, 75 percent of their business was refinancing, and that percentage has dropped below 50 percent.
Another factor affecting the real estate markets are some new regulations that are rolling out. The loan process has become more "cumbersome" and the debt ratio of 43 percent for a qualified loan, means some people are having a tougher time getting home loans.
"There's been a few customers that we would have probably made a loan to last year that we are being cautious with," he said.
Dan Dressman, executive director of the Home Builders Association of Greater Cincinnati, for the past year at least was reporting a decent recovery of housing markets post-recession. He said the number of new home buyers has flattened out. This time last year 1,581 building permits were pulled compared to only 1,002 this year in Butler, Clermont, Hamilton and Warren Counties. That is the lowest six-month total in the four counties over the past five years. There was a 2.1 percent drop year-to-date for single family home permits in Butler County and 19 percent in Warren County.
Dressman said the frigid winter weather did impact the market but even though the Great Recession is officially over, the economy is still the number one reason for the housing slump.
"The biggest issue right now out there, the cloud over the housing market, is the whole employment picture," he said. "For the most part if they do have a job they're under employed, they're not making what they used to make or they're working part time. I wouldn't say it's a bad market, it's just that we've had better ones."
Oda said what she is seeing is that not only are people not refinancing and up-sizing, but she met a couple recently who couldn't downsize because of rising interest rates. She said she personally refinanced a year ago and got a 2.5 percent interest rate and she has seen rates as high as five.
"The general consensus here is people just aren't getting loans," she said. "They are staying put."
Steve Foster, president of LCNB, and he thinks supply could also be an issue. He said he noticed a lot of the developers went out of business or had to cut back during the recession, so there might be a scant supply of homes to purchase. He does however see a glimmer of hope.
"For us in this area, Dayton and Cincinnati, I do think we're seeing some things pick up," he said. "We're seeing some more purchasing and some more construction," he said. "But it's nothing to shout about."
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