Mortage crisis! In Eau Claire?

Homeowners, real estate agents discuss local housing market

By: Emily Hartwig

Posted: 4/14/08

In November of 2006, then-sophomore Nick Wellenstein evaluated the housing market in Eau Claire and decided to take a step most students probably wish they could do - become his own landlord.

Wellenstein, a junior, and his freshman brother co-own a house on State Street. Wellenstein said it is a great investment for a student because the money he would've used on rent is now going to provide for his future.

"I have a little cushion now," Wellenstein said, adding that the good atmosphere for buying homes in Eau Claire contributed to his decision to purchase.

While national headlines are exclaiming the woes of the "mortgage crisis," such real estate woes aren't hitting as hard in the Chippewa Valley. According to a March 23 article in the Leader-Telegram, foreclosures are up nationally 75 percent from last year. But local real estate agents said that while foreclosures are also on the rise in the Chippewa Valley, the impact isn't nearly as harsh, and it's still even a "buyers' market."

Mike Paul, a 1998 Eau Claire graduate, runs eauclairebyowner.com, a discount real estate brokerage. A foreclosure, he said, results when a person takes out a loan to buy a house but is unable to make the monthly payments. The bank can then take back the home and auction it off, sometimes resulting in the eviction of the previous owner.

Aaron Tiry, an Eau Claire real estate agent who specializes in foreclosures, said Eau Claire tends to be "a very conservative area" when it comes to the real estate market, since it doesn't see the drastic ups and downs like some parts of the country.

"On a local level, (the mortgage crisis) hasn't affected us that much," Tiry said.

The "national mortgage crisis," Paul said, results from the fact that two years ago, it was too easy for people with bad credit to buy homes. Banks would give loans to people who normally wouldn't qualify, he said, but now that generosity is "coming back to bite us."

"People who probably never should have been allowed to get mortgages in the first place got … mortgages or bigger mortgages than they should have," Paul said.

Since that time, the value of real estate has dropped, which has contributed to the high number of foreclosures. Usually the price of real estate goes up every year, Paul said, but last year it went down for the first time in a while. He said this is called the "bubble mentality," adding that it has the biggest impact in high-growth areas such as Florida, California, Las Vegas and Phoenix.

In Eau Claire, however, real estate doesn't normally appreciate as much - maybe two to three percent a year - so the sudden drop didn't hurt the market as significantly, Paul said.

"Things tend to be more stable here," he said.

Junior Luke Benedict is another student who is taking advantage of low real estate prices. Just last week, Benedict said he closed on a house on Hatch Street. Even though he had to co-sign with his parents to obtain the mortgage, Benedict said he is making all the payments on the house, which he said he got for a great price.

"I got it for a lot better deal then I would've if it had been a normal market," Benedict said.

But many people aren't buying homes right now, Paul said, because real estate is not appreciating the way it was a few years ago. He said this results in a good buyers' market for people looking for a good price on a home.

"A good deal is easier to come by now than it was two or three years ago," Paul said.

However, this also means it is not a lucrative time to sell a home, Paul said, because of all the competition.

Tiry agreed that it's a buyers' market, but said banks are still looking for good buyers, which means they probably need to have a good credit score. A recent college graduate with a good credit score could possibly afford to buy a home, for example, Tiry said.

Benedict admitted he doesn't have a lot of credit built up, so a bank probably wouldn't have given him a loan for his house.

"I doubt I would have been able to pull it off without my parents' help," he said.

Tiry said interest rates are low, loans are still possible through various bank programs and there is a good selection on the market.

Whatever the real estate climate, Benedict said owning a home is more financially smart than renting a house.

"If I'm going to put money toward a house," he said, "… I'd rather buy my own house so I can get a return on it."