LAKE COUNTY ? A wave of home foreclosures has rippled across the U.S., and Lake County is not untouched. In the third quarter last year, notices of default for home owners in Lake County numbered 129, up 20 over the previous quarter. That number is 92.5 percent higher than the same time last year, in which there were 67 notices, according to a recent report released by DataQuick Information Systems of La Jolla.
According to real estate agents and industry experts, the current quandary is the result of appealing “teaser” rates that led to a sharp increase in lending in 2004 and 2005. The rates reset much higher in 2006 and 2007.
“The sub-prime rates, those are the key ones,” said Middletown real estate agent Cynthia Smith, of Century 21 House of Realty. “People didn”t read the little writing that said in three to five years, instead of paying $2,000 per month, it”s going to be $5,000.” So far in the first quarter of 2008, statewide there are 134,844 sub-prime loans in foreclosure, and 70,575 prime loans, according to data compiled by the U.S. Conference of Mayors, which uses the information to predict how it will affect local economies.
Suddenly, buyers who would not have qualified for mortgages at the reset rates found themselves with a home they are unable to pay for or to sell, Smith said. In addition, with mortgages divided and resold in secondary bond markets, there is often no mortgage-holder left with whom to renegotiate the payments. Foreclosures are the result.
“These are record foreclosures. If someone”s house was worth $500,000, and now it”s only worth $395,000, people aren”t going to be able to pay the $500,000 the banks are owed. The banks are putting the price on the court house steps, they”re not selling, and that means the banks are getting them back,” Smith said.
January is the most sluggish real estate sales month, Smith said, making it an especially difficult time for home sellers. “People usually wait to list in March. January it”s just too rainy, dark and gloomy.”
While Lake County has a reputation as being a place that is still affordable to buy, foreclosure rates still affect the county. “This is a place you came to save money. People bought homes here and commuted?I”d say 50 percent commute out of the county, and now a lot of people are getting laid off, so that”s a factor. It really affects the people who are just getting by from pay check to pay check,” Smith said.
Global Insights, a Boston-area firm that specializes in economic predictions, expects 2008 will bring even more foreclosures, slower growth of the United States GDP (Gross Domestic Product), distress for state and local government budgets and curtailed consumer spending.
“The issue is whether the real estate market and the economy will digest these [loans] over the next year or two, or if housing market distress will bring the economy to its knees,” DataQuick President Marshall Prentice said.
While the situation is the worst she”s seen in her 10 year real estate career, Smith thinks it will pick up soon. “It”s one of those up and down things, we just have to ride the roller coaster.”
Contact Elizabeth Wilson at ewilson@record-bee.com.
