Orange County Mortgage Problems Won’t Compare to Other Regions
The troubles in the bad credit mortgage industry could bring stagnation to the California housing market, but Orange County should be spared the worst fallout,the Orange County Register reports.
In a report to be released today, Ryan Ratcliff, an economist with the UCLA Anderson Forecast, points out that markets with a higher proportion of first-time buyers and new homes - the Inland Empire and Ventura County - are seeing a bigger surge in defaults, or borrowers who fall 90 or more days behind on California mortgage payments, than Orange County.
That’s because “buyers without a major home equity windfall from their last home are the most likely to stretch to afford their first mortgage, while builders trying to move inventory quickly might have lowered lending standards to close deals,” Ratcliff writes.
Unlike other sectors of the greater Los Angeles housing market, Orange County is “neither a first-time buyer market, nor a market with a lot of new building,” Ratcliff said in an interview.
For those reasons, the recent rise in defaults is of a lesser magnitude here.
The financial difficulties roiling Orange County-based home loan lender institutions such as Ameriquest Mortgage Co. and New Century Financial Corp., triggered in part by rising defaults, have sharply curtailed borrowing opportunities for people with bad or little credit.
That means fewer people will be able to get a California mortgage loan to buy a home, cutting into the volume of sales, while a jump in foreclosure sales by banks could depress home prices.
“Since the [bad credit mortgage loan] market was almost the only thing keeping sales volume buoyant in the last years of the boom, the drying up of subprime credit suggests that home sales in California will be stagnant for some time to come,” Ratcliff writes.
The median price of an existing single-family home in Orange County has fallen in six of the past seven months compared to year-earlier levels, according to the California Association of Realtors.
The median in February was $692,820, up slightly from January but down 3.9 percent from February 2006.
While Orange County is home to a number of subprime lending organizations, the job losses at those firms aren’t likely to be enough to push the local economy into recession.
Ameriquest and its sister companies last month laid off an estimated 3,000 of 6,000 workers in four states. Other local bad credit mortgage lenders that have had layoffs in recent months include New Century, Fremont Investment & Loan, ECC Capital and ResMae Mortgage Corp.
While it is a significant industry in Orange County offering relatively high-paying jobs, non-bank mortgage lending accounted for just 1.5 percent of the county’s total number of jobs in 2006.
SOURCE: Orange County Register