Adjusting mortgage rates, national foreclosures on the rise, threats of a looming economic recession…times are tough. Just ask the Georgia man who donned a ski mask and walked into a bank, pointed a gun at the teller and said, “You took my house, now I’m going to take your money.”
The FBI is still looking for that guy, but around these parts we’ve been a bit luckier. Usually this column has advice for home buyers and sellers on what to do. But with all the attention being paid to the national real estate picture (“attention” roughly translating into “looks of horror”), it might be a good moment to assess how the local market stacks up to the national market. Short answer: It ain’t nearly as scary.
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While the average home price in Virginia has fallen since 2005 and foreclosures spiked in 2007, according to George Mason University’s Center for Regional Analysis, foreclosure database Realtytrac only listed 29 foreclosure properties in the Charlottesville area at the end of February. Most real estate experts agree that the cushion provided by the area’s major employers—UVA, the National Ground Intelligence Center—makes the city and surrounding counties less vulnerable to the shifts in the national real estate market.
With the local market just coming out of its winter hibernation, and with the subprime mortgage fiasco still roiling the credit markets around the globe, perhaps now is a good time to take a step back and reassess just where we stand. In the interest of getting the scary stuff out of the way first, we’ll start with a quick glance at the national picture.
After the subprime flameout began in the summer of 2007, in which people with less-than-pristine credit saw their overblown mortgages adjust to ungodly rates, The New York Times reported that the delinquency and foreclosure rate for all mortgages hit 7.3 percent. That’s the highest percentage since that data started being tracked in 1979. And it’s not just subprime borrowers who are feeling the meltdown’s heat. The Times also reported that delinquency and foreclosure have moved into the prime mortgage sector.
By October, almost 4 percent of prime mortgages were past due or in foreclosure, compared with 24 percent of subprime. According to Realtytrac, back in 2005 less than 1 percent of all U.S. households were in some stage of foreclosure.
A large number of adjustable-rate mortgages (ARMs) are set to adjust after March, which is leading to speculation that even more people will fall behind on payments or face foreclosure. But while sales in the Charlottesville Metropolitan Statistical Area (MSA) have been slumping, we haven’t felt a major impact from the convulsions in the national real estate market.
After topping out in June 2005, sales have declined, but that doesn’t mean the Charlottesville MSA is a declining market. Matt Hodges of Compass Home Loans says that the area is “absolutely not” in decline. Certain areas of the market, such as Crozet, had seen a oversupply of houses, many new construction. Area prices have come down to absorb that oversupply, he says, then stabilized. Appraisers that he has talked to think coming data will show that Crozet has gone stable.
“We’re not seeing price declines,” says Hodges. “That [means] quarter after quarter, for the same square footage, you’re having the same sales price.”
Even during the slow winter months, some houses are moving as sellers are adjusting pricing expectations to the new market. Hodges says Compass had a strong finish to the year and a good January, with the majority of loans for new purchases, not refinances. And he says buyers are becoming more savvy.
Translation? It might be cold comfort to those locals who are in danger of losing their houses. But in real estate, as with many things, life in Charlottesville is apparently something of an exception.