Mississippi Mortgage Foreclosures Rising

Foreclosures in Madison County have increased 154 percent over the past year, records show, one indicator of the glut in the Mississippi housing market, in part because of overbuilding, analysts say.

There were 168 foreclosures in Madison County from June 2006 to mid-May, the records show. Comparatively, there were only 66 foreclosures from June 2005 to May 2006.

What’s more, defaults on home loans and mortgages have increased 177 percent, records show.

• From June 2006 to mid-May of this year, there were 347 defaults.
• From June 2005 to May 2006, there were only 125 such notices.
• In every month of this year, the number of foreclosures increased over the same month in 2006, the statistics show.

In January, for example, there were 20 home mortgage loan foreclosures, compared to only five of January 2006. In April of this year, 24 were filed, compared to five in April 2006.

Vickie Graves, a mortgage loan originator at AMS Mortgage in Madison and 24-year veteran of the industry, said that the sharp rise in foreclosure statistics does not surprise her.

“It makes me sick. It’s heart-breaking,” she said.

She blamed a general glut in the market that can only be solved by the laws of supply and demand.

“When there’s too much out there, then the market makes that correction,” she said.

Graves said some consumers have over-extended themselves with Mississippi mortgage payments they now can’t handle.

“They’re anxious to get into that $500,000 home, instead of that $250,000 home they need to be in,” said Graves. “Builders, realtors, mortgage people - no one should accept all credit or blame in this case.”

Anyone who takes a trip through some of south Madison County’s high end neighborhoods, she said, will be able to confirm the sluggish pace of higher-end home sales.

According to the Jackson Realtors Association, the average list price of a home in Madison and Ridgeland is about $358,000, with an average sale time of 98 days, as of May 18.

The median price for a home in the South was $181,000 in April.

There were 953 homes listed in the Madison-Ridgeland area, more than any other real estate market in metropolitan Jackson, according to the Realtors association.

In Northeast Jackson, the average listing price of a home is $276,000, with an average sale time of 88 days and 406 homes on the market.

Nationally, the supply of houses on the market is the highest in 15 years, according to the National Association of Realtors. The median price nationally last month was $220,900, they said.

David Breland, a builder in Madison who has built in subdivisions such as Reunion, Belle Terre and Twin Cedars, said that many home builders lose sight of a very simple concept in the housing market.

“Obviously, the more expensive the house is, the smaller your market is,” said Breland.

In recent years, Breland said that doctors, lawyers and others with no building experience have gotten into the business.

But their lack of a building background means that they don’t know how to manage their projects and avoid financial problems.

“They don’t know the ins and outs, and they don’t know how to make a house,” said Breland, who is a member of the Mississippi Homebuilders Association. “They don’t know until the smoke clears that they’ve lost money on the thing.”

Madison County Tax Assessor Gerald Barber, a member of the Mississippi Appraisal Board, estimated that out of the hundreds of builders working in the area, only about a third of them are registered with the Mississippi Homebuilders Association.

Many of the rest, he said, do not do basic market research.

“A good bit of those people should not be in the home building business,” he said.

According to Graves, home builders who know how the system works will need to adjust, while those who can’t will simply have to get out of the game.

“The builders either have to scale down or build smaller homes, or they simply have to pull out of the market all together,” she said.

Even experienced builders are seeing difficulties. Breland noted that he has had one home on the market for over two years.

If builders cannot sell a house within six months, he said, the builder begins losing money on the property.

Graves blamed the bad sub-prime mortgage market for some of the problems. These “bad credit mortgages,” she said, were not always in the best interests of homebuyers.

“Sub-prime lenders are tightening up on what they offer. There are less unique products than six months ago,” said Graves. “Wall Street has tightened up on that.”

Barber said that he thinks criminal activity has been a large part of the problem of rising foreclosures, not just bad credit home loans alone.

“Mortgage fraud is huge - billions of dollars are involved,” said Barber. “A lot of foreclosures, in my opinion, are coming from mortgage fraud related situations.”

Officials said that it was too early to tell the financial impact of the rise in foreclosures on county finances, such as the current $1.7 million shortfall of tax income for the Madison County School District.

Chancery Clerk Arthur Johnston said that the higher foreclosure numbers may account for some of the school district shortfall, but not all of it.

“There is no way the numbers justify it totally,” he said.

Barber agreed, although he did say that since the school’s fiscal year ends on June 30, it may not be able to benefit from money redeemed at the county tax sale in August.

Looking at the housing market in general, Graves said that she expects to see the trend in foreclosures continue over the next 2-3 months.

Over the long-term, however, she said that the county has a sophisticated set of house shoppers and with mortgage rates low, should have a consistent pattern of growth.

County government continues to see a rise in the tax value of real personal property, such as homes. During the last fiscal year, the tax settlement for such property was $67.6 million, according to County Tax Collector Kay Pace.

So far in this fiscal year, $69.1 million in taxes has been collected on real personal property. Graves said that home sales should continue making a positive contribution to this trend.

“There won’t be products that won’t sell,” she said.

SOURCE: Madison County Times