New home prices rise to record levels

McALLEN - New home prices set a record high in August as eroding consumer confidence and tighter lending standards made selling low-income housing more difficult, officials said.

The average value of a new, single-family home in Hidalgo County rose in August to a record $155,600, while across-the-board home values increased only slightly after slumping for months, according to the Real Estate Center at Texas A&M University.

In Cameron County, the average value of a new, single-family home rose slightly in August to $101,900. The price of new homes has fluctuated wildly in the past year, peaking at $116,500 in March.

"The entry-level market has gone away," said Jim Gaines, a researcher with the center. "There just isn't as much being sold at the bottom end."

Increasing economic pressure and tighter lending standards have stifled borrowers with lower incomes while banks continue to extend loans to people with good credit and a down payment, Gaines said.

"If people have good credit, there's no reason they can't get financed today in spite of all the media hype," said Charles Marina, a Realtor with First American Realty.

Banks want more money down and a higher credit score from borrowers, said Deborah Martin, owner of Edinburg-based Realty World Valley Properties.

"If they've got a 620 credit score and 5 percent (of the home price) down, they're good to go," Martin said. "I don't see banks (rejecting loan applications from) people who have good credit."

Gaines, however, said some banks expect down payments of 15 or 20 percent unless the home is insured by the Federal Housing Administration. FHA loans offer fixed interest rates but require a minimum down payment of 3 percent.

While FHA advertises that it can extend loans to people with lower credit scores than most, Valerie Cardenas, head of the lending department for International Bank of Commerce in McAllen, cautioned that banks won't extend an FHA loan to someone with a credit score
lower than 580.

"Although FHA says we're flexible in our underwriting, it's at the discretion of (bank) investors," Cardenas said.

Credit scores range from 300 to 850. Most lenders regard scores above 700 as very good and a sign of good financial health, according to the Federal Citizen Information Center. Scores below 600 indicate high risk to lenders and could lead them to charge a prospective borrower much higher rates or even turn down the credit application.

While area real estate professionals agreed credit is still available, they disagreed on just about everything else. Some argued the area should expect home prices to continue falling, while others said there is already indication the market has hit bottom.

During the real estate boom years, Rio Grande Valley developers - like many of their peers across the country - simply built too many homes. At the current rate of sales, it would take some 14.8 months to sell off all the homes now on the market in Hidalgo County, according to the Texas A&M Real Estate Center.

That oversupply has helped to drive down home prices, which have fallen considerably from their peak 2006 levels. Yet the average home sale price in Greater McAllen rebounded some in August, rising from $101,300 to $106,500 - a sign that home prices were stabilizing, according to some area real estate professionals.

"There's always good-quality buyers out there," said Connie Fielder-Norton, owner of Fielder-Gardner Realtors in McAllen. "The good-quality buyers have been ignored, because it was so much easier to get subprime borrowers."