Bankers forecast tighter times in Aspen
ASPEN, Colorado ” The national credit crunch is only going to get tighter, effectively slowing the local real estate market further than it already is, according to Aspen bankers who addressed a room full of Realtors Wednesday at the Hotel Jerome.
The Aspen Board of Realtors hosted a banker and lender forum in which a three-member panel addressed the state of the market.
Within the next year, interest rates will rise, banks will fall under tighter lending regulations, and credit will be increasingly more difficult to obtain, according to Charlie Bantis, senior vice president of Vectra Bank.
“I think we are setting ourselves up to levels of 1979 to 1983,” he said, predicting a rise in prime interest rates to somewhere between 18 and 20 percent, and more lengthy mortgages.
Bantis added that stagflation ” a combination of inflation, slow economic growth and high unemployment ” will be a reality for months to come, which is why if he were a realtor, he would be telling potential buyers to get in now, credit-wise, before it gets worse.
“Those who do well in inflationary periods hold hard assets,” he said, adding land is one of them.
Jody Cooper, a home mortgage consultant at Wells Fargo in Aspen, said banks are lending at a steady rate right now because people are taking advantage of low interest rates and their ability to qualify for a loan.
“I think there is a little misnomer that no one is lending money,” she said. “We are doing a lot of loans and we’re seeing a lot of purchases.”
Scott Gordon, president of Alpine Bank’s Aspen branch, said while Pitkin County is showing strength in terms of homeowners’ ability to pay their mortgages, that will likely change as more people lose their jobs.
“I don’t think we’ve felt the full effect yet,” he said, adding that he predicts there will be more foreclosures in the next year. “We’re not out of the woods yet.”
When fielding a question from a realtor, the bankers said the speculation home market is saturated and lending on new projects has dried up.
Bantis said in Pitkin County, there are 140 homes on the market that are between $4 million and $8 million, which is far more than what was experienced in 2001-02.
He noted that other counties like San Miguel, where Telluride is located, are doing far worse than Pitkin County as far as real estate transactions are concerned.
“Sales have fallen off a cliff in other resorts,” Bantis said.
Bankers agree that underwriting has gotten loose as a result of the good times, and people’s memories are short when it comes to past economic downturns.
“We’re in a period of way too much leveraging,” Bantis said. “We need to get out of debt.”