Pennsylvania Housing Market Sales Dominated by Foreclosed Properties
A large chunk of homes sold in Monroe County so far this year were houses in foreclosure.
In 2006, foreclosed homes accounted for 9.6 percent of all home sales in this Pennsylvania housing market. That rate more than doubled to 20.4 percent in the quarter ending March 31. Factors leading to foreclosure likely include sub-prime mortgages and over-extended consumers.
While homes in foreclosure were usually six to seven years old in the past, home mortgage broker Vicki Brockelman now sees many after only two to three years, coinciding with the typical teaser period of adjustable rate mortgages.
Brockelman believes it indicates some buyers are spending too much on their homes, making them house poor with all of their income going to pay their Pennsylvania mortgage.
“If one thing goes wrong, the whole thing comes tumbling down,” said Brockelman of Coldwell Banker Phyllis Rubin Real Estate.
The jump in foreclosed homes sold may be slightly overstated; fewer homes are placed on the market in the early part of the year, whereas foreclosures are generally not seasonal. In December 2006, the Pocono Record reported the first rise in Monroe County home foreclosure filings in three years. As of Dec. 26, 806 home foreclosures were filed, with a sharp increase in the second half of the year.
Home sales in Monroe County fell more than 10 percent last year to 3,127 homes sold, down from 3,492 in 2005. But sales of foreclosed homes jumped by 23.6 percent.
The average sale price for foreclosed homes dropped by 3.2 percent to $139,497 so far in 2007. Comparable year-to-date figures for home sale prices in 2007 were not available.
But Brockelman sees an upside.
“One person’s loss is another person’s gain,” she said. “As prices go down, more people will be able to buy.”
Some real estate agents see a tightening of credit — fallout from the higher rate of foreclosures — hurting home sales in the area. Fewer buyers may qualify for mortgages.
Borrowers with a credit score of 520 will get closed out, as banks will look for a 580 instead. Buyers with poor credit may have a tough time raising their credit score. Subprime mortgages, along with rising mortgage rates and a flattening growth of home values, caused a sharp increase in loan defaults across the country.
And home mortgage defaults have tightened the secondary market for loan repurchases.
Some of the country’s largest subprime lenders are fighting for their corporate survival, suffering the dual impact of home loan defaults and a loss of their funding streams.
In Monroe County, predatory lending practices and inflated appraisals were blamed for an unusually high rate of foreclosures early in the decade. The state attorney general’s office launched criminal actions, leading to guilty pleas by the owners of a building company with in-house brokerage services. Civil actions are still pending against various builders, lenders and appraisers.
POCONO HOME SALES: These will remain flat in 2007, although it could be too early to predict a definite trend, said Tom Wilkins, president of Wilkins & Associates Real Estate.
“We still have a pretty strong market from New York and New Jersey. Affordability is the number one strength the Pocono home market has. As long as we can maintain that, we will be competitive,” he said.
Wilkins downplayed the impact of bad credit home loans here.
“While the Poconos did a lot of 100 percent and 103 percent financing, it really hasn’t been in the subprime area. The 80/20 mortgage is popular in the Poconos,” he said.
An 80/20/piggyback mortgage loan blends a lower interest rate on 80 percent of the loan with a higher rate as a premium for supplying the down payment portion of the home purchase.
SOURCE: The Pocono Record