Real estate loans harder to come by

Funding for spec homes and second homes under close bank scrutiny

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— Besides the obvious, there's a very practical reason independent building contractors in Steamboat Springs aren't in the planning stages for new spec homes to launch in 2009.

"We've made every (spec house) loan request we've had in the last four months, which is none," banker Paul Clavadetscher told a local audience of real estate and development professionals Wednesday.

Clavadetscher, branch president of Millennium Bank in Steamboat, was on a panel of lending professionals that convened for Colorado Group Realty's second Real Estate Roundup and Expo at the Steamboat Grand Resort Hotel.

On a more serious note, Clavadetscher said the existing inventory in the Steamboat market, coupled with the pace of transactions, makes it difficult to lend money for spec home construction.

"Right now, we would be looking very closely at a spec loan," he said.

The banking term "time to return" has everything to do with the explanation, Clavadetscher added. Most construction loans for spec houses are for 24 months, he said. That allows 18 months for construction and a six-month selling period. With robust inventory in most housing categories on the local market, as well as a slow pace of sales, there isn't much room to think a spec house will be sold within that timeframe, he said.

Clavadetscher was speaking with three other lending professionals on a panel moderated by Realtor Shelley Stanford, of Colorado Group. The others included Tom Ernst, of Catamount Mortgage; Kari Pier, branch manager of Wells Fargo Bank in Routt, Eagle, Summit and Grand counties; and Dean Vogelaar, president of the Steamboat branch of Mountain Valley Bank.

Vogelaar said area banks still have money available for mortgage lending, but bankers and mortgage lenders are becoming more cautious in making those loans.

"All of us are taking a very conservative stance," Vogelaar said. "More than ever, we're looking at loan-to-value, debt-to-income and assets."

Pier said mortgages for second homes still are readily available in the mountain markets where she works, but requirements for credit scores - typically 680 and above - are being strictly followed. And second homes in the $1 million and above range are demanding 25 percent down payments.

Stanford asked Ernst to describe how the current real estate environment is affecting lending.

Ernst responded that it might be more appropriate to examine the way loan underwriters are impacting appraisers.

"The appraiser community is under much more scrutiny," Ernst said.

In particular, Ernst said, appraisals in mountain communities are leading underwrites to ask specific questions about local markets.

"Underwriters want to know much more about our town," Ernst said.

- To reach Tom Ross, call 871-4205

or e-mail tross@steamboatpilot.com

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