Concerned by foreclosures but keen to take advantage of sliding home prices, a growing number of prospective buyers in the United States are signing up for a different kind of class: home-buyer education.
"These people have seen what's happened around them, to their neighbors, their friends or their family," said Tim Bolding, executive director of United Housing, a nonprofit lender that offers such classes.
"They want to buy but don't want to end up like the people they see around them, so they're coming to us."
Memphis, where United Housing is based, had the 13th highest rate of foreclosures among U.S. cities in 2007, with 22,654 filings, or 2.1 percent of homes in foreclosure, according to RealtyTrac.
And, in the first quarter of this year, the median sales price for an existing family home in the Memphis area was down 18.5 percent from a year earlier, at $110,800 compared with $135,900, according to the National Association of Realtors (NAR).
Attendance at United Housing's home buyer classes—mainly for low income borrowers—has jumped some 30 percent this year as a result, Bolding said.
"Most of the questions we get from prospective buyers are focused on how to avoid adjustable rate mortgages and other problem products they've heard about in the media," Bolding said. "Everyone wants to avoid a bad loan."
This is a far cry from the property boom, when fast-and-loose lending principles meant low-income borrowers could get loans instantly with little or no documentation—and had little need for nonprofit lenders like United Housing.
"During the boom, our home loan business trailed off to nearly nothing," said Bob Boyle, head of Justine Petersen, a nonprofit lender based in St Louis. Its home ownership program consists of building up a prospective home buyer's credit rating and financial acumen over six to 18 months before giving them a mortgage.
"When borrowers could get a loan instantly regardless of income or credit rating, why would they wait?" said Boyle.
Now the housing crisis has pushed home prices down—median prices in the St Louis area were down nearly 10 percent in the first quarter, according to NAR data—but credit standards have tightened, hopeful first-time buyers have returned to nonprofit lenders like Justine Petersen.
"There has never been a better time to be a first-time buyer," said Sheri Flanigan-Vazquez, Justine Petersen's chief operating officer. "If you can get access to credit, that is."
But while demand for home buyer education is spiking in some areas around the country, nonprofit groups say their resources are stretched so thin by providing foreclosure prevention counseling they have few resources left to help prospective homeowners.
"We're swamped right now," Bolding said.
Prices of existing U.S. single-family homes have slumped over the past year in what many see as the worst U.S. housing market in a century.
According to the Standard & Poor's/Case Shiller home price index data for March, prices of previously owned single-family homes were down 14.4 percent year-on-year.
But that dip in prices has been accompanied by rising interest among renters in buying a first home.
"We're seeing an increase in consumer awareness of what home ownership involves," said Milton Sharp, a senior home ownership specialist at NeighborWorks an umbrella organization of 230 nonprofits nationwide, "and a desire from people to find out what their options are."
For people like Richard Rodgers, a steel cutter who lives in a southern Memphis suburb just a stone's throw from the Mississippi state line, low home prices represent an opportunity to buy a first home. Rodgers, 39, has found a three-bedroom home for $74,000 he hopes to buy.
"It's time to buy a place for my wife and to make my kids happy," said the father of two in the living room of his rented home. "And it looks like a great time to do it."
But Rodgers' Realtor, Kizzy Neder of Lawrence Johnson Realtors Inc, persuaded him to sign up for United Housing's home buyer classes before signing a contract.
"I tell my first-time buyers you have to know what you're getting into before it's too late," she said.
Rodgers said the class helped him appreciate buying a home in an entirely new light.
"The class taught me that this is a long-term investment, the biggest I'll ever make," he said, holding a framed certificate from the course. "And it's not just the house, I've to think about property taxes, bills and so much more."
Rodgers said he will probably still buy his dream home, but only after checking if he can afford all his bills.
Chris Krehmeyer, executive director of St Louis-based nonprofit lender Beyond Housing said that the spike in demand for home buyer education was welcome but long overdue.
"People need to be frightened when it comes to buying a home," he said. "It's not an investment to be taken lightly."
In some places, education may not be enough. Kevin Stein, associate director of the California Reinvestment Coalition—which represents 250 nonprofit groups and public agencies—said there has been little interest in California in home buyer classes because of the scale of the housing crisis there.
"It's an encouraging sign that some valuable lessons have been learned from the crisis," he said. "But even if we were to witness the same level of interest in home buyer education, I doubt our members could handle it."
"Right now, it's all we can do to keep up with the demand for foreclosure prevention counseling."