Springfield News-Leader: Foreclosures Affecting Local Housing Market

Thursday ‘s Springfield News Leader (October 9) featured an article on foreclosure rates in the local area, and the impact those foreclosures are having on the housing market and residential construction. HBA of Greater Springfield Executive Officer Matt Morrow and Greater Springfield Board of Realtors President Doug Andrews both were interviewed in the article below. 

October 9, 2008
County foreclosures at all-time high
Poor economy and rising mortgage rates blamed for record numbers.
Didi Tang
After posting a record number of foreclosures in 2007, Greene County is expected to smash the record by a huge margin this year, displacing families and depressing home values in neighborhoods.
By the end of September, 732 Greene County homes had been foreclosed on, up more than 42 percent from the 514 foreclosures between January and September 2007.
The Urban Neighborhoods Alliance in Springfield projects the 2008 figure could reach 1,045, compared with 736 in 2007.
Those who work closely on the issue blame the poor economy and the resetting rates on adjustable rate mortgages that have pushed up monthly payments after several years of low interest rates.
“The combination of the two things cause such a big spike,” said Bob Horton, executive director of Urban Neighborhoods Alliance.
“Our job market is really tight now,” said Tonya Collister, housing director at Consumer Credit Counseling Services of Springfield. “The cost of everything has gone up, and it has pushed some people to the edge.”
Said Tom Wyrick, professor of economics at Missouri State University: “Some of the loan terms have become more difficult with more demanding balloon payments, which occur after two or three years has passed.”
However, Collister noted that Springfield has not been hit as hard as some major metro areas.
Across the country, subprime mortgages and the housing slump have triggered a financial crisis on Wall Street, putting the national economy in jeopardy.
At a more local level, foreclosures have driven families out of their homes and hurt neighborhoods and communities.
“Where did the families go after they moved out? Did they go to rental properties? Did they move in with other family members? Did they become homeless — which I hate to see?” Collister said.
Besides dislocating families, a foreclosed home can drive down property values by 1 percent in its immediate vicinity, Horton said.
Doug Andrews, president of the Springfield Board of Realtors, said foreclosed properties sell for less, dragging down the value of nearby homes.
A recent study shows each foreclosure can diminish home values by $2,000 on average within a two-mile radius, Andrews said.
“If you have three or four foreclosures, that’s a load,” he said.
During the foreclosure process, which can take more than a year, homes often get neglected and fall into disrepair, Andrews said.
“Owners are moving out and no longer taking responsibility for it,” Andrews said. “We’re having a problem with the depressed properties themselves. How would that depression affect a neighborhood?”
The median home price in Greene, Christian and Webster counties and surrounding areas dropped nearly 5 percent, to $120,200, in the third quarter of 2008 compared with a year ago. The median price for July, August and September 2007 was $126,500.
The average home price also fell in the same period to $139,985, down from $150,632 in 2007, according to the Springfield Board of Realtors.
Matt Morrow, executive director of the Homebuilders Association of Greater Springfield, said the real estate market has been deterring new home construction.
“The problem right now is some new homes are appraised for less than what it costs to build,” Morrow said.
Then there are distressed properties that are on the brink of foreclosure but sold at discounted prices, Morrow said.
Morrow estimated new home starts will decline to one-third to half the level seen in 2005 and 2006, when the building industry hit record highs.
In an effort to boost the local market, Morrow said this is a good time for first-time homeowners and those with cash to buy.
The epidemic of foreclosures has touched every corner of Springfield, Horton said.
“It’s not a north-side, south-side issue,” he said.
Added Andrews: “I don’t think anyone is immune to everything going on. It’s affecting us on all levels we can think of.”
In Springfield, Consumer Credit Counseling Services has been fighting the spread of foreclosures since late 2006.
The success rate has been 94 percent, which means the agency has pulled 94 people of every 100 away from foreclosure, said Mike Cherry, president and chief executive officer of CCCS.
This year, the agency has helped more than 200 families stay at their homes, said Collister, who expects the grim task to continue for at least another year.
Federal assistance is not in sight, but state funding remains available, she said.
Lenders, who want to minimize losses, are willing to work with borrowers, Collister said.
But for homeowners who may be slipping into a mortgage crisis, the key is to act as early as possible.
“The sooner, the more options you have,” Collister said.