Foreclosures in county mirror national trend

A rise in Clark County foreclosures seems to mimic the national surge in mortgage defaults, although some say the outlook here is not so grim.

A total of 225 Clark County homes were lost to foreclosure through July, up from 138 foreclosures in the same period in 2006, according to data compiled by the Bank of Clark County. The information follows a report that national foreclosures experienced a 93 percent year-over-year increase in July, as overstretched homeowners and home builders with unsold inventory continued to react to weakening home sales and restrictions on lending.
Steady home values here suggest that the local market is stronger than in many other areas of the nation, said Mike Worthy, chief executive officer of the Bank of Clark County.

"The good news in Clark County, particularly, is the value of homes is holding up pretty well, relative to other markets," Worthy said.

At $262,000, the median price of all new and pre-owned homes sold here in July was just slightly lower than the median price of $269,900 for homes sold during July 2006, according to "benchmarks," a Vancouver real estate tracking service.

Compared with more dramatic price softening in other parts of the country, Clark County's fairly healthy values could be a break for overextended local homeowners. Of those, many face an impending mortgage payment increase, a result of initially financing with low-interest adjustable-rate mortgages, or ARMs. Worthy said some may need to act quickly or risk foreclosure.

"If the value of your home is staying even, you have a chance to make a hard decision, to sell the home and move to something less expensive," Worthy said.

Selling challenges

He and other analysts acknowledge selling will be more difficult for buyers who bought homes during a three-year housing boom that lasted through 2006. Easy financing, or subprime lending, extended during the period allowed buyers to take on greater risk, too much, in some cases, said Dave Dahlstrom, chief credit officer and executive vice president of Riverview Community Bank.

Subprime mortgages were offered "not just to people with low credit scores, but to people who didn't have the traditional 15 to 20 percent down," Dahlstrom said.
The lax credit terms allowed buyers to "move up" into homes priced just beyond their means, Dahlstrom said. Many of those buyers are now trying to sell, a situation that is adding to a glut of higher-priced, $400,000 to $450,000 homes on the Clark County market.

"There are just too many of them," Dahlstrom said.

The total number of homes for sale in Clark County added up to a 7.6-month supply in July, according to Portland-based Regional Multiple Listing Service, up from a 6.1-month supply in July 2006 and a 2.0-month supply in July 2005. The number means it would take 7.6 months to sell all the homes if no new listings were added.

The inventory won't sell off as quickly now because the pool of potential buyers can no longer secure subprime mortgages. Once considered high-yield by group investors, subprime and related "Alt-A" loans are no longer a hot commodity. Rising foreclosures unleashed an industry-wide domino effect among subprime lenders.

"The subprime market has dried up like a desert and the huge mortgage companies across the country are folding like tents," Worthy said.

Increasing foreclosure rates could take a year to 18 months to level out, said Tim Duy, an economics professor at the ­University of Oregon.

"We could be into 2008 or 2009 before things level out, and I suspect a (housing market) rebound is many years into the future," Duy said. In the meantime, Duy said overstretched homeowners face a difficult climate for working out solutions to mortgage default.

"It used to be banks would be willing to work out a situation," Duy said.
But the banks are not the owners of subprime mortgages, which were bundled into complex packages and sold as investments.

"Now there's no obvious linkage between an investor who owns your mortgage as part of a portfolio of assets," Duy said.

Worthy said potential home buyers will eventually gravitate back to traditional fixed-rate mortgages, products offered by established banks.
Homeowners facing default "need to sit down with a real mortgage professional and evaluate their mortgage contract," Worthy said. "I'm sorry to say some people will find selling the house is the best option