West Virginia Mortgage Outlook: Safer Than Most

As with twisters and hurricanes, West Virginia appears to be sheltered from the eye of the storm buffeting the nation’s mortgage markets.

But that doesn’t mean it won’t get rained on.

West Virginia mortgage providers have been cutting back drastically on lending amid a rise in defaults on risky loans and an exodus of investors from the credit markets.

The Dow Jones Industrial Average fell more than 1 percent for the week, dragged down by the stocks of banks, home builders and other firms connected to the home mortgage industry.

There are, of course, plenty of banks and home builders in West Virginia, but they haven’t been basking in the mortgage boom of the past decade as much as states like Florida and California.

Therefore, West Virginia mortgage lenders won’t come crashing down as hard, says state Banking Commissioner Larry Stark.

“Where the increases have been large, the correction will be large,” says Stark. “We haven’t seen the large increase in housing prices as in more frothy markets, with perhaps the exception of the Eastern Panhandle, so there’s less to correct [here] than in other states.”

Home prices in the West Virginia housing market do remain far below the national average. The median price in the Charleston area between April and June was $127,600, compared to $223,800 nationwide.

And Charleston prices are rising, up 10.8 percent from the first three months of the year, while nationwide prices are falling, the Realtors research shows.

Sales are down here, but they’re down almost everywhere - even as West Virginia mortgage rates remain at or near historic lows.

About 30,400 homes were sold in the state in the April-to-June period, down 13.6 percent from a year earlier, according to the Realtors.

Nationwide, 10.7 percent fewer houses were sold, while in Florida the decrease was 41.3 percent and in California 19.8 percent.

“All these things happening in the market … will have a direct and indirect effect on the West Virginia consumer because West Virginia is a part of the national market in financial terms,” Stark said.

“There will be a definite ripple effect.”

For one thing, credit is a lot scarcer.

“There’s less money available to borrow, which will percolate down to the state,” Stark said. “Since there’s far less liquidity in the market to support the investment in [West Virginia mortgage] loans, the ultimate outcome is simply that there will be fewer loans made, comparatively.”

That’s already happening.

“The underwriting criteria is tightening across the board,” says Larry O’Dell, a mortgage broker in Charleston.

“They’re asking for more documentation, looking at debt ratings — it’s a lot more difficult to get [home mortgage loan requests] out of underwriting than it was.”

O’Dell said it’s especially hard to get approval for “subprime” (bad credit home loan) borrowers, the weak lending demographic responsible for many recent defaults.

Follow the link to continue reading this Charleston Gazette article on the future outlook for West Virginia home loans …