Alabama Housing Market Thrives Despite Subprime Surge
In some places, the bad credit mortgage storm bypasses an area’s prosperity.
Every once in a while, whether its killer bees, swine flu or trans fats, a thing that suddenly goes from being barely known to turning up everywhere with lots of scary reports fanning the flames.
Right now it’s the scourge of bad credit home loan lending, and judging by Wall Street’s week, getting chased by a cloud of killer bees may a better deal than holding a lot of subprime loans.
Thursday saw the Dow Jones Industrial Average fall more than 300 points, and while plenty of factors contributed, uncertainty about how much capital is at risk in the bad credit mortgage market. Foreclosures are climbing, leaving lots of people on edge.
Subprime loans essentially allow for a borrower with weaker credit to get a mortgage loan, with provisions that the interest rate will increase within a few years depending on rate trends and other factors.
The problem for many borrowers has been that it cost them a lot to get into the house, and when mortgage rates change, say 2 percent, monthly payments that were around $1,000 will rise some $230 a month.
The following year, another 1 percent increase, means mortgage loan payments will have risen by about $366 in under two years.
If that isn’t bad enough, many borrowers took on those tough home loan terms expecting housing prices to keep rising.
But housing prices have stalled or fallen in many once-hot markets, and borrowers now face paying more for a house than it’s worth.
That kind of hit is causing delinquency and foreclosure rates to rise, as subprime, adjustable-rate mortgages begin to reset, with higher mortgage rates.
Delinquency rates, meaning one or more missed mortgage payments, in the subprime, adjustable-rate mortgage market has reached nearly 16 percent.
Huntsville and Madison County, Ala., stand a little apart from the trends that are dogging real estate markets, particularly in California, Florida, Nevada and Arizona.
The Huntsville real estate market, which includes the Rocket City, Madison, and Madison County, has seen home prices rise some over the past year, with about the same number of properties being sold in the first six months of 2006 and 2007, said Betty Hughes of the Huntsville Board of Realtors.
Like most of the Alabama housing market, business remains brisk with the expectation of thousands of new residents moving into jobs created by BRAC benefiting Huntsville and Redstone Arsenal in the next few years.
“Huntsville is kind of a world of its own,” Hughes said.
“People try to lump all real estate in general, but it is all local. With the type of major industries we have here and so many people coming in and out, the economy is stable and there is plenty of growth.”
The Huntsville, Ala., market includes a number of subprime (bad credit home loans), several sources said.
Ron Sykstus, a bankruptcy lawyer in Huntsville, said he thinks foreclosures are up and said the people he is assisting in bankruptcy claims tend to be facing more than one difficult circumstance at the same time.
That can include increased medical bills, reduced income and rising credit debt. Combining those factors with rising Alabama mortgage costs spells serious financial trouble.
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