Oregon Public Broadcasting

For a while now, homebuilders and sellers have been asking themselves how low do prices and mortgage rates have to fall to lure buyers off the sidelines. 

We're learning one answer.  How does less than four percent for a 30-year fixed rate loan sound? 

A mid-sized regional bank credits last year's massive bailout of the financial industry for making that ultra-low interest rate possible. The deal starts in the Portland area this month and moves to Seattle next month and then on to Spokane and Boise.

Tom Banse reports on the reaction.

Custom homebuilder Ken Gertz says he nearly fell out of his chair when he heard the interest rate his lender would offer prospective homebuyers.

Ken Gertz: "The interest rate of 3.875% has never happened in history, period. Even in my grandfather's day it didn't happen."

At the beginning of the month, Gertz had nine new homes on the market in the Portland area.  Some have sat unsold for eight months.  He says he's "discounted to the bone." Now Gertz says it feels like the dam is finally breaking.

Ken Gertz: "In three days, we sold three houses.  So you know, it works.  I mean people were lined up inside our models walking around.  I haven't seen traffic like that since 2006, at the peak."

As Gertz talks, a cleaning crew spruces up a four-bedroom, three bath he hopes to sell next.

Here's the catch.  That really low fixed mortgage rate applies only to new homes and condos where Banner Bank or its subsidiaries financed the construction. 

Borrowers need to have good credit scores. The deal currently covers over 300 properties scattered across greater Portland, central Oregon and southwest Washington.  Close to 200 more homes in the Seattle, Spokane and Boise markets will qualify starting next month.

Banner Bank's aim is to reduce the inventory of unsold homes.  That's a first step to cure the ailing housing market. 

Vice president for marketing Doug Bain says a recent infusion of federal cash into his bank allows it to cut loan rates to record lows.

Doug Bain: "We feel that it is part of our duty to assist our builders and to assist possible homebuyers in moving this economy forward and doing our small part in helping the housing market get a little bit of a jumpstart here in the early spring."

There's no profit to be made loaning money out at below four percent interest according to another executive at the bank.  But Bain says Banner asked itself whether itís worse to watch its homebuilder clients twist in the wind and possibly slip into default.

Doug Bain: "In the long term, we'll be much better off than if we had to carry these homes in the inventory for an extended period of time. They'll stay out of having to go through further reduction in prices and values and putting more strain on the builders that have completed their construction."

Banner like most other regional banks has seen its portfolio of bad loans swell rapidly in recent months.  Federal bank examiners decided the bank was fundamentally sound when they injected over a hundred million dollars to jumpstart lending.

23 other Northwest banks also have received so-called TARP money from the U.S. Treasury.

Private economist Jerry Johnson of Portland says he wouldn't be surprised if competitors match Banner's offer at some point.

Jerry Johnson: "Success always breeds duplication.  So I think what youíre going to have if this is working, you'll see other people stepping forward saying, 'That's a pretty good way to get rid of, get out of these positions.'  If it's actually working, then people will match it."

Johnson says interest rates don't get any better than this.  He predicts home prices might slide a little bit more, but not much.  We're in a window of opportunity for buyers, one he says could close in as little as six months.  As that happens though, it means the Northwest housing market is recovering.

Online:

Banner Bank "Great Northwest Home Rush"