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By Paul Gores

RISMEDIA, Oct. 15, 2008-(MCT)-Susan Kerwin’s three-bedroom house in Jackson has been in move-in condition since she put it up for sale in May. The trouble is finding someone who wants to move in-or even make an offer.

She’s heard lots of reasons why people who have looked at the house decided not to pursue it: Competition is fierce because there are so many similar houses on the market; it’s too far from a Milwaukee workplace; potential buyers didn’t qualify for a mortgage.

She’s already lowered the price by $6,900, to $283,000. She might reduce it again to $280,000, but that’s about as low as she can afford to go, she said.

“Unless you want to give away your equity in your home, you are really stuck,” she said.

The housing market in the Milwaukee metro area isn’t stagnant, but it’s far from robust, real estate agents say.

“The activity isn’t as brisk as we would hope,” said real estate agent Dave Schmidt Jr., whose Dave Schmidt Realty sells homes on Milwaukee’s south side and south suburbs. “There are still deals going on. It’s a good time for buyers to be out there because prices have come down and interest rates are real attractive. But they appear to be nervous, sitting on the sidelines, most of them.”

Contributing to the slow pace are stricter standards for mortgage borrowers. That means bigger down payments and higher credit scores than a couple of years ago, when, as one longtime mortgage broker said at the time, “anyone who could fog a mirror” could get a mortgage.

Of course, the wave of unqualified buyers who were given home mortgages is at the root of the financial system crisis. And while most in the industry consider it a good thing that zero-down-payment mortgages and loans to people who couldn’t really afford to pay them back are history, that history is affecting the housing market.

For a conventional mortgage loan at most-favorable interest rates, a higher credit score will be required these days, along with 5% to 10% down, said real estate agent Benjamin Boeshaar of Coldwell Banker in Menomonee Falls. Credit scores are based on considerations such as a person’s record of paying bills and how much other debt he or she has.

“There are still some programs out there for people who have lower credit-FHA and that sort of thing. But for people who want to get conventional loans, the standards definitely have become more stringent,” Boeshaar said.

Mortgagebot LLC, a Mequon-based provider of Web-based loan origination technology, said mortgage buyers Fannie Mae and Freddie Mac have raised their down payment guidelines and are requiring a minimum credit score for borrowers. Meanwhile, mortgage insurers also have tightened requirements for insuring the mortgages of people with low down payments.

Before the credit crunch, 100% mortgage financing was “pretty readily available” via Fannie Mae and Freddie Mac, said Rick Allen, Mortgagebot’s director of strategy.

“Today the maximum financing they would do would be 95% loan to value, so they are now requiring 5% down instead of, in many cases, zero percent down previously,” Allen said.

In addition, houses bought as investments rather than as primary residences are considered riskier and now require 20% down instead of 5%, Allen said.

Some will wait

Ann Daul, a renter in Wauwatosa, said she can’t help but be a little resentful that her goal of buying a home probably will take longer because of the abuse of mortgage lending and borrowing that occurred over the last few years. At 25, Daul said, she’s paid off her college loans and has been saving for a down payment that now probably will need to be bigger than she thought.

“For the last three years I haven’t gone on vacation. I’m not flying to Mexico or Jamaica or anything like that, and the people who have these outrageous mortgages are going on vacations, they have $40,000 in credit card debt,” said Daul, a paralegal. “Due to their mistakes, it defers my dream of being a homeowner.”

Still, bankers insist there is plenty of mortgage money available for qualified customers — a pot that probably will grow as shell-shocked stock investors move their money into certificates of deposit and savings accounts at federally insured banks and credit unions, some say. Banks and credit unions use the deposits they take in to make loans.

“Mortgage rates are really still very low,” said Rose Oswald Poels, senior vice president for the Wisconsin Bankers Association. “It’s understandable that people are concerned and just waiting before they take any action. But I think there are some very good house price values out there right now for people to either buy for the first time or even make that next step with a house. Interest rates are extremely attractive right now. If you’ve got decent or better credit I think you’ll be able to get a loan.”

Brian Wickert, president of Accunet Mortgage in Butler, said “there is plenty of mortgage money available, despite reports to the contrary in the general media.” FHA-insured loans have the “friendliest” terms for people with average credit scores, he said.

“The vast majority of people can still qualify,” Wickert said. “If a renter wants to do something patriotic in today’s market, they should go out and buy a home. There’s plenty to choose from and you can drive a good bargain. As long as you’re buying a home as a place to live and not as a quick investment play, you should come out just fine.”

Still affected

Although Wisconsin has avoided the boom-bust environment that has hammered housing prices in fast-growing areas such as Arizona, Florida and Nevada, the housing slump has slowed the pace of sales and rolled back prices here this year, too.

Houses listed by Realtors in the seven-county metro Milwaukee area were on the market an average of 113 days though the first nine months of the year, compared with 100 days in the same period in 2007, according to data released Friday by the Wauwatosa-based Multiple Listing Service Inc. The average sale price was $234,530, down 4.7% from $246,164 in the first nine months of 2007.

In the seven counties — Kenosha, Milwaukee, Ozaukee, Racine, Walworth, Washington and Waukesha — there were 2,114 homes sold, down almost 20% from the 2,636 in the first three quarters of 2007.

But in a positive development, the MLS report showed that in the broader metro area in the month of September, home sales rose 3.1% compared with September 2007. That was the only time this year that sales grew compared with the same month a year earlier.

Beth Jaworski, an agent with Shorewest Realtors in Wauwatosa, said that in this market, buyers who have been shopping for homes via the Web know what they want and act fast when they find a good deal.

“Things are moving, but you’ve got to be the best price and the best condition,” she said. “Or you sit.”

Copyright © 2008, Milwaukee Journal Sentinel
Distributed by McClatchy-Tribune Information Services.