House calls: Bankers have tough decisions to make, as hot market faces new factors

Whether it’s a familiar gauge or not, it’s safe to say there’s something most already know about the S&P CoreLogic Case-Shiller Home Price Indices, which measure the country’s home prices …

They have gone up. A lot.

And, in New Jersey, mortgage lenders have mixed feelings about how far the red-hot housing market might be from a cooling-off moment. Mortgage rates are rising, issues with housing stock are being recognized and the pandemic’s pitched-up buying might be slowing.

Will it bring down prices? Bankers aren’t totally sure.

Either way, they’re not expecting trends to knock the residential side of their business sideways.

John Fitzgerald. (File photos)

John Fitzgerald, CEO and president of New Brunswick-based Magyar Bank, will add that doesn’t mean what mortgage lenders in the state have is a comfortable situation.

“Housing prices are much higher than they should be, and the banking sector has to be careful, given that it has learned some tough lessons in terms of those increasing values of properties in the past,” he said. “But, despite that, we’re still seeing a lot of interest in purchasing, even if people are maybe not as feverish about getting into homes as they were last year.”

Fitzgerald said that might be truer as time goes on, and as mortgage interest rates climb higher. They recently hit 5% for the first time since 2011, according to a Freddie Mac tracker. Rates were 2% lower in November.

Christopher Maher.

Historically low mortgage rates have added to the bidding war formula in the current housing market. But Christopher Maher, CEO of OceanFirst Bank, said it’s far from the central ingredient.

“The housing prices are being driven by one simple thing: There’s far too few housing units available for people who want them,” he said. “Certainly, interest rates changing does break some buyer demand down. But, in the New Jersey economy, we’re seeing the inventory of homes available a fraction of what they were even a year ago.”

Maher added that, in New Jersey and other jurisdictions, it’s hard to get lots of homes approved and built in a hurry, even if that’s exactly what a shift in buyer demand after years of muted household creation levels has called for.

“Units available and demand doesn’t look to me like it’s coming into equilibrium anytime soon,” he said.

As house prices put even entry-level homes out of reach for many residents, apartment buildings have come online to try to fill the void. Wages haven’t perfectly synced up to the price of those rentals, either, however.

“So, there’s real affordability issues in the region,” Maher said.

Martin Melilli. (TD Bank)

Martin Melilli, commercial market president for Cherry Hill-based TD Bank, said from his national bank’s perspective, there’s bright spots. Permit activity for new homes is reaching higher levels, he said, and those projects should work toward a stabilization of the market.

For the time being, the large lender has dependable interest in mortgage loans in New Jersey. And, while some in the industry project that higher interest rates will weigh down refinance activity, TD Bank is still finding customers who feel like they haven’t missed the boat.

“From the latest I’ve heard, we’re holding steady,” Melilli said. “We haven’t seen a drop since interest rates ticked up. But, really, it’s no surprise we’re holding steady, because there’s usually a three- to six-month lag before you’d see that effect. So, we have to wait to see that.”

Still working with immigrants

There are landmarks in New Brunswick’s Fifth Ward district that vouch for its bygone reputation as the heart of the country’s Hungarian population. Most of its century-old history is told in statues, plaques and renamed parks.

Another of those landmarks is a bank along the city’s French Street that has stood the test of time.

Magyar Bank charts its origins back to 1922, when Hungarian business leaders started a new bank to support a local immigrant population’s unserviced banking needs, especially when it came to securing housing loans.

John Fitzgerald of Magyar Bank said that, although the Hungarian American community has dispersed far and wide since then, lending challenges faced by the region’s immigrants remain.

Magyar Bank, through its foundation, has offered financial education programs to today’s local immigrant community and also participates in homebuyer down payment assistance programs.

“In New Brunswick, it’s more the Hispanic community today that we’re making outreach to, in order to bring them into the banking system,” he said. “The goal is for them to avoid having to use check-casher companies to transact business, which is very expensive for people earning just median or lower salaries.”