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.
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The wave of mortgage foreclosures feared across the country hasn’t hit the West Virginia housing market yet, but it might not be far off.
Amid rising interest rates, falling house prices and a bulging portfolio of questionable home mortgage loans made to people with bad credit, lenders began sounding alarms earlier this year.
Foreclosures hit record highs in the last three months of the year, and a pall settled over “subprime” lenders, or those that lend to borrowers with poor credit and who consequently don’t qualify for prime mortgage interest rates.
At least two subprime lenders have been given cease-and-desist orders by state and federal regulators, and others are veering toward bankruptcy.
The threat of mass foreclosures appears to be the most serious in states with highly speculative real estate markets, such as California and New York and the District of Columbia, but it’s a nationwide problem.
The West Virginia mortgage delinquency rate rose more than any other state’s during last year’s fourth quarter, according to data compiled by the Mortgage Bankers Association trade group.
More than 7 percent of loans for one- to four-unit residences in the state were past due, up 1 percentage point from the July-August-September period. That gives West Virginia the sixth-highest delinquency rate in the country, the MBA survey shows. (Mississippi’s is the worst, at 10.64 percent.)
As with the rest of the country, much of the credit crisis in West Virginia is resulting from subprime loans. Just over 19 percent of such loans on West Virginia home mortgages were late, and nearly 4 percent were in foreclosure in the fourth quarter, the MBA says.
Too often, subprime borrowers sign loans to buy houses they have no business buying, and it’s happening more often, says Jeff Wise, president of Consumer Credit Counseling Service of Southern West Virginia, a nonprofit counseling agency based in Dunbar.
“We see it a whole lot more than we used to,” said Wise, who has been counseling debtors for 20 years. “Especially in areas where people are not as highly educated, and with senior citizens, lenders see them as easy targets.”
Consumer Credit’s client base has surged in the past few years, in large part due to changes in bankruptcy law requiring credit counseling for filers. However, predatory lenders are also contributing to the problem, Wise said.
Last year, the agency’s five offices conducted 3,060 counseling sessions, up nearly 95 percent from the previous year and more than double the total in 2004.
Typically, predatory lenders will lure borrowers with the promise that they can home mortgage loan refinance later and lower their rates, said Consumer Credit counselor Crystal Kudlak. Borrowers also overextend themselves in refinancing to cover unforeseen expenses, such as medical problems, she said.
Loan-to-value ratios are supposed to top out at 80 percent or so, Kudlak said, but some borrowers go in for 125 percent of their home’s worth.
While most banks make subprime loans, the dubious loans tend to be made by specialty mortgage finance firms, Wise said.
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Ralph and Blanche Ettinger placed their single-family home up for sale in June and waited for a buyer to come along and snap it up.
More than six months later, the Martinsburg (W.V.) Journal reports, they were still waiting when a buyer emerged with an offer - only the second offer they received the house.
It sold for $260,000, about $29,000 less than the couple’s initial asking price. Ralph Ettinger said the wait surprised him.
“When we put it up, they were going in weeks,” Ettinger said. “We knew it was going to take longer than that, but we didn’t think it was going to take six months.”
Ettinger isn’t the only homeowner to see a property languish on the market before selling for considerably less than the original asking price.
The once red-hot real estate market in the Eastern Panhandle of the West Virginia housing market has cooled considerably since last year, resulting in declines in home prices and increases in the lengths of time properties remain listed.
While the number of homes sold in all three Eastern Panhandle counties in January 2007 increased slightly over the number of sales during the same month last year, the number of days on market has driven prices down and contributes to sharp decreases in the average sales prices.
“Today the seller is waiting longer on his dollar,” said local broker Greg R. Ahalt. “(The longer listing times are) driving them nuts and holding them back from movement forward. They’re not used to it.”
The total number of units sold in Berkeley County increased 7.89 percent from 76 in January 2006 to 82 during January 2007, but a property for sale in Berkeley County in January 2007 spent 102 days on average on the market, a nearly 79 percent increase over the same time the previous year.
At that time, West Virginia mortgage costs were lower and activity was considerably higher. Now, the market is higher than the average buyer can handle, resulting in downward pressure on prices.
With home mortgage demand languishing, cumulative sold-dollar volume in the Eastern Panhandle also took a hit, losing a million dollars in total value in January 2007 from the same month the previous year, exclusively as a result of the total sales volume in Jefferson County plummeting 24.44.
It’s clearly a buyer’s market, and potential first-time buyers are starting to take notice after months of sellers and purchasers trying to wait one another out, said Andrea J. Burke, with Re/Max Success Realty.
“For several months, we were at a standoff. Buyers didn’t want to pay too much and were waiting to see if the prices would drop more, and the sellers were tired of dropping prices so neither side moved an inch,” Burke said.
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Regional housing trends in the greater Washington, D.C., area continued to iron themselves out before the close of 2006 to put up numbers that, while down slightly, still beat out many other housing markets nationwide.
According to the Martinsburg (W.V.) Journal-News, statistics offered up by the Metropolitan Regional Information Systems Inc. showed a positive change between the calendar years 2005 and 2006.
“Although selling prices edged down a tic in D.C., suburban Maryland showed an increase of 5.6 percent and suburban Virginia prices rose 1.4 percent, keeping the regionwide percentage positive,” said Dr. John McClain, senior fellow at the Center for Regional Analysis at George Mason University.
The Eastern Panhandle of the West Virginia housing market did not fully bounce back from the decline in real estate values.
On average, those counties the farthest west from the district sold fewer housing units in 2006 than they had in 2005 and those that did sell spent considerably more days on the market during 2006.
According to the data for homes in the $30,000-500,000 range, median sales prices on homes in the tri-county area rose slightly as well this past year.
In Berkeley County, lower West Virginia mortgage demand meant more than 500 fewer homes were sold in 2006 than in 2005.
Those properties also spent an average of 28 more days on market, wooing potential buyers despite median increases of more than $10,000 per home.
In Jefferson County, prices per home edged up much more slightly, as the cost of mortgage loans remained affordable for residents. Still, approximately 200 fewer units were sold in 2006, after having spent an average of 25 days longer on the market.
Morgan County largely fared the same as Jefferson County, with 140 fewer units selling and an average home price nearly $23,000 more than those seen in 2005. Homes there were also spending an average of 20 more days on the market during 2006, as well.
MRIS reports for the beginning of 2007 show an abundance of houses on the market in Berkeley County, with just 82 of 1,304 active listings selling in the month of January. In neighboring Jefferson County, 35 of 544 active listings sold, while 13 of 245 homes were sold in Morgan County.
Prices of houses in all three W.V. counties declined slightly in January when compared to 2006 average values. The number of days houses were staying on the market continued to climb, however, making for frustrating and slow conditions for property owners seeking to unload real estate.
McClain predicted that once the winter weather calms down, home prices will continue to rise throughout the region, even showing single-digit gains in appreciation for 2007.
SOURCE: Martinsburg Journal-News
Sliding demand for coal and home mortgage loans alike are going to put a damper on the state’s economy for the next five years, a West Virginia University economist predicted Wednesday.
Coal mining and home construction largely fueled new job growth over the past three years, WVU professor George Hammond said in presenting his annual economic forecast. Combined, the industries added approximately 12,000 jobs over the past three years, nearly half of West Virginia’s total, the Huntington Herald-Dispatch reports.
“That’s unusual,” Hammond said.
And unlikely to continue.
Waning demand already has cut coal prices and lowered production. When it comes to construction, particularly of new homes, figures to slow due to higher mortgage rates and larger inventory.
However, Hammond predicts the West Virginia housing market will suffer less than the rest of the country. The housing slump already is resulting in lower corporate and severance taxes on coal. For instance, severance taxes are expected to hit $315 million this year, then drop to a range from $250 million to $300 million.
Hammond did have several good things to say about the state’s economic future. The state added 26,600 jobs between the second quarter of 2003 and the same period this year. Mining and other natural resource industries added 5,200 jobs and education and health care positions rose by 6,200. The population grew at the same time.
However, Hammond said there are some risks facing the state. Among them, a national recession and the potential decline in housing starts as well as state manufacturing jobs. While Hammond said he expects those losses to stabilize at best, he expects increases in other facets continue to grow.
This just goes to show the trickle-down effects mortgages (and the cost of them) have on an entire state’s economy. When no one’s buying homes, everyone gets pinched a little harder.