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The stock market has been a mess since subprime mortgage companies got in trouble because adjustable rate mortgages caused many consumers with subprime loans to let their homes foreclose. The real estate market made a 180-degree turn from a couple of years ago, when homes were being snapped up as soon as they became available, and prices were going through the roof.
The number of buyers in the market has significantly decreased because people with poor credit who were able to get a mortgage a few years ago from subprime lenders can no longer do that — many of the banks issuing subprime loans have gone bankrupt, and additionally the credit rules have been tightened. Even Congress is getting involved, with consumer groups urging new regulations.
Across the country, foreclosure rates have gone up as much as 100 percent. In Kitsap County, due to the stable economy and the lower number of subprime loans, the situation is not as dire. According to numbers provided by Carolyn Frame, owner of CFA Northwest Mortgage Professionals, Kitsap had 435 foreclosures in 2005, 462 in 2006, and 287 as of June 30 of this year. If the rate continues, by the end of the year Kitsap could see 574 foreclosures, a 32 percent increase from last year.
“Overall, we’re in better shape than nationwide, but that’s still a lot of people, and who knows what’s lurking behind the scenes,” Frame said.
With the number of buyers reduced, people whose ARMs are adjusting and leading to higher payments are unable to sell their homes. They can no longer refinance either because their credit is usually poor.
“The backlog of homes is getting bigger and bigger,” said Fred Depee, a real estate agent with John L. Scott in Port Orchard. Even homes that are priced right are on the market for several months, and Realtors report that some homes priced under market values may not show for a long time in some cases either.
The good news for buyers is that the slow market has stopped the price escalations that were out of control a year or two ago. “Sellers now recognize the prices are not going up 1-2 percent a month — they’ll be lucky if they go up 1 percent in a year,” said Don Pennington, a longtime agent with Windermere Real Estate/West Sound Inc. in Silverdale, who is also known as the “Dean of Kitsap County Real Estate.”
The bad news is that the home market may not see any relief for months if not year. Depee says the arrival in South Kitsap of a major player, Quandrant Homes, is squeezing out the market even more by taking out the bottom layer of the market and causing a domino effect on all the other price brackets.
Frame said one of the aspects that contribute to foreclosures is the fact that people with low credit scores were not in a good position to get a mortgage in the first place. Many of those homeowners didn’t learn how to handle their money.
“Money management has been an issue,” she said.
Frame says she wants to help, and is looking at what can be done for those people who may be at risk of losing their homes. In September, she plans to launch a program through her second company, Creative Solutions. The program will entail a two-year commitment and the clients must agree to rent for a year or two while getting their finances in order. She said after a year of good credit, homebuyers can qualify for an FHA or VA loan, and by then they will also learn how to manage their money and budget.
“If they are committed to a two-year recovery program, we are here to help,” she said.
Frame’s goal is to work with a number of professionals and give clients access to a variety of resources and advice. Clients should be willing to learn and change their lives.
“I say, let’s make sure our Kitsap County doesn’t become like the rest of the country,” she said. “I just want people to know there’s hope, but they need to take action.”
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