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Jessica M. Sibley

Clemson real estate expert Elaine Worzala says “funky financing” is to blame for the housing crash and urges people to rent if they cannot afford mortgage payments.

CLEMSON — While the condition of the economy hovers around the sour mark, the problematic real estate market isn’t making things any sweeter.

Elaine Worzala, director of the Center for Real Estate Development at Clemson University, thinks “funky financing” is to blame.

“Tax credits, loan extensions and other programs do not really get at the root of the problem, which comes from the fact that “easy” money increased prices to a level that was not sustainable,” she said. “Properties are not affordable without the “funky financing,” and that funky financing is gone. Lenders no longer are willing to lend at 95 percent to 97 percent loan to value ratios. They want — and should want — borrowers to have “skin in the game,” which means they have to have a serious down payment. But 20 percent of $300,000 is $60,000, and few people have $60,000 just sitting around to put into their house — so we are in a Catch 22 until prices fall to more affordable levels.”

While affordable housing ownership seems to be a luxury these days, Worzala wants renting to lose its negative stigma.

“Some people do not have the income to buy; they do not have that down payment, so therefore they should not own. It is OK to rent,” she said. “We rented in San Diego as we thought the markets were turning. Nothing happened to us; no one treated us differently and we took care of our property. There is this stigma associated with renting that does not need to be there. You should only own if you can afford it, you are able to pay for the additional costs of homeownership, and it does not leave you house poor and up all night wondering if you can make your mortgage payments as well as eat dinner this month.”

Worzala is looking for the dark skies to clear over the property storm.

“Markets always come back,” she said. “It may, however, take a long time, and we will not go back to the same prices we had at the top of the cycle. Sellers will have to re-adjust their expectations and drop their prices to the point where the market clears. We also need to get away from the idea that everyone has to own. We are in for more stormy weather as loans come due and there is no financing out there.”

jsibley@dailyjm.com | (864) 882-2375