Banks in Dickinson, North Dakota do not want to loan money on property, and end up owning property in Dickinson, and it is causing real estate prices to fall. No matter what people in Dickinson say or think about the economy in Dickinson remaining steady or improving, the Banks think the opposite, as demonstrated by their current lending practices.
The Banks don’t want to loan money on property in Dickinson because of the following doubts about Dickinson:
- The Banks believe that real estate prices in Dickinson will continue to fall.
- The Banks do not want to have loans on properties that are depreciating, which people would walk away from when they owe the Bank more money than their home is worth.
- The Banks believe that the economy in Dickinson will continue to decline, with fewer jobs, lay-offs, businesses closing, and wage rates continually decreasing.
- The Banks do not want to loan money based on people’s income history in Dickinson, because they believe that many people will lose their job, be unable to find another job, and their wage rates will continually decrease.
- The Banks believe that people in Dickinson will default on their home loans, because they will get laid-off, be unable to find another job, their wage rates will drop, or they will find out that they owe more money on their home than it is worth as its value depreciates.
- The Banks believe that they will likely end up owning many properties in Dickinson because of people defaulting on their mortgages. The Banks believe that these properties will be depreciating in value greatly, they will be unable to find qualified replacement buyers, and the Bank will be responsible for paying insurance and high property taxes on these properties for many years.
In order to not have problems, the Banks are trying to not lend money on houses in Dickinson, because they don’t want to end up owning many, many houses in Dickinson.
The Banks don’t care, that the depreciation of home values that they are so worried about, they are perhaps the primary cause of this right now.
I will give two quick examples of home buyers who were willing to pay the seller’s asking price, but the Banks would not loan money to any of the buyers, so the home price dropped 10% to 20% in less than one year.
A friend of mine who has lived in Dickinson for 35 years, currently owns a home with $20,000 remaining on his mortgage. I believe his current mortgage payments are $300 per month or less. He is single, and a couple of years ago he no longer had to make child support payments of $700 per month or more on his two children, as they are now grown. He has worked at the same company for over eight years, and his take home pay after all taxes is at least $3,000 per month. He owns several vehicles, which are paid for.
He agreed to purchase a neighboring house for $134,000, which was less than the current appraised value. He thought that he would have no problem getting a mortgage for this house, based on his income, his employment history, his large equity in his current home, and having no car payments, credit card debt, or other debt. But the Banks in Dickinson denied him a home loan.
If you use an on-line mortgage payment calculator, the mortgage payment for the $134,000 house would be less than $900 per month, plus his current mortgage payment is $300 per month. For a single male with $3,000 per month income after all taxes, with no other debts, why couldn’t he afford $1,200 per month total for home payments?
The Banks did not want to make a home loan to him with payments of less than $900 per month, but for twelve years on his income he had paid nearly this much every month in child support.
Within less than one year, the seller’s asking price for this home that he agreed to buy for $134,000 had dropped to $120,000.
This second story is about my experience. I own a home in Idaho which is paid for, but I have been working in Dickinson for almost six years. For about three years, I was a roommate of a home owner in Dickinson, where I paid about $480 per month. Once the Oil Boom ended, and so many out of state workers returned to where they came from, apartment rents in Dickinson decreased greatly, and I rented an apartment for less than $400 per month. However, I wanted to get out of this apartment, because I had some bad neighbors. I saw a very inexpensive manufactured home for sale in Belfield, on its owned land, so this was something that I was interested in buying:
A trucking company in Idaho, that was doing business in North Dakota, wanted to buy housing for three of its truck drivers, so this trucking company purchased a 3-bedroom single-wide manufactured home in Belfield on its owned triple lot, for nearly $50,000 in about 2014. This trucking company completely furnished this manufactured home with everything from furniture, to appliances, beds, bed linens, cookware, and utensils.
This trucking company in Idaho, no longer does business in North Dakota, so they wanted to get rid of this manufactured home, just like it is, with all of the furnishings. Six months ago, they were asking $25,000. I went and looked at it, and it was fine with me. The property taxes were only about $100 per year. The mortgage payments, would be much less than I had been paying in rent for the past six years in Dickinson.
I went to or spoke to four or five Banks in Dickinson, and they each had their own excuse for not wanting to lend any money for this manufactured home, such as “We have been instructed to not lend money on any manufactured home whatsoever, no matter how new it is, or how much land is involved.” or “We can not lend money because the land is zoned commercial.”
I thought that this was ridiculous, I have very good credit, this was less money than a new vehicle costs, and the Bank could place a lien against my paid for home in Idaho if they ever needed to collect their money. I was seriously considering putting this home purchase on my credit card, which has a credit limit of $35,000.
Many other people looked at this manufactured home in Belfield, and tried to buy it, but none of them could get a loan from a Bank. A few days ago, the real estate agent sent me a text message, stating that the seller’s asking price is now down to $20,000. This is a 20% price drop in six months. I would have been happy to pay $25,000 with a home loan from a Bank.
I know one other person in Dickinson now, whose take home pay after taxes is at least $3,000 per month. He is single, in his forties, and he has been employed with the same company for several years. He recently applied for a home loan with a Bank in Dickinson, for a home owned by a relative of his who is willing to sell it to him for less than $200,000, even though the appraised value would be closer to $250,000.
This Bank informed him that they would approve him for a mortgage of up to $70,000. Which means they don’t trust him to be able to make monthly payments of more than $400 per month. If a single person’s take home pay after taxes is $3,000 per month, why wouldn’t this person be able to afford mortgage payments closer to $1,000 per month, and a mortgage of up to $180,000?
What I am explaining, is that Banks in Dickinson right now are being very restrictive on home loans, because for one thing, they expect home values to decrease. The funny thing is, these Banks’ lending policies are the primary cause right now for why home values are decreasing. They won’t loan money even when buyers are willing to pay the sellers’ asking prices.