Montrose - Daily Press

MONTROSE — It is true. Foreclosures have increased in Montrose County. The total number of sales in the area are down. Home values have also decreased and there is a larger buyers market than ever before.

Montrose county and city data show that our area, much like the rest of the state and nation, is dealing with foreclosures and a falling housing market. Montrose, which was for so long isolated from state and national trends, is finally feeling the ripple affect of a national problem, however data shows it’s not as bad as other places around the country.

Foreclosure

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Montrose native Dave Weber bought his house at 1551 64.50 Road about three years ago. He moved his wife and two young boys into the home and parked his camper and 4-wheelers in the yard.

He knew the house needed repairs, including new windows and siding, but he never figured that additional construction projects, plus some unexpected medical emergencies would put him in the position he is in now — foreclosure.

He’s not alone though. There were 102 foreclosures in Montrose County in 2007, and an additional 38 carried over into 2008, according to Montrose County Treasurer data. In 2005 there were 72 foreclosures in the county; 87 in 2006.

Weber had heard the national foreclosure statistics, but didn’t think it would happen to him. He got a $145,000 home loan at 7.99 percent, and hadn’t missed a payment.

About a year after he bought the home, he refinanced through American Servicing Company in Des Moines, Iowa with a 9.99 percent interest. Now he spends hours a day on the phone with the company trying to save his home, each time he is told something different.

His advice to others now, “Don’t let it happen. When you get financed, make sure it is the right company and you are getting the going interest rate. Stay local. Stay local,” he said.

Merle Allen, director of counseling for the Grand Valley Housing Initiatives, a Department of Housing and Urban Development certified housing counseling agency, gives the same advice.

“The best thing you can do is stay local. These are people that have to look you in the eye,” he said regarding lenders. “Think of it as interviewing an employee; hire someone you can trust. You want to know they have your best interest in mind, not whether or not they see you as a dollar sign when you walk through the door.”

Lenders and loans

“When the market was really hot, almost anyone could get a loan,” said Marjorie Phelps, broker, owner of The Marjorie Phelps Co. real estate company, and current president of the Montrose Association of Realtors.

It’s the American dream to own a home, but the age when families save their money to put a down-payment on a home is obsolete. Now, a person can find a loan for a 100 percent of the cost.

“We are not a nation of saving but of spending,” certified Countrywide home loan salesman Joshua Applegate said.

Before subprime mortgages, a person had to qualify for a loan and their credit score was a major factor. Subprime loans were created to “make ownership more available to more Americans,” Allen said. It was economy driven.

“It was a good idea gone bad,” he said. “The American Dream was to own a home, but it wasn’t available to the working class American. ... The idea was never being that someone would look at that and take advantage ... it spiraled out of control.”

Generally, subprime mortgages are for borrowers with credit scores under 620, according to Bankrate.com. The loans are more likely to have a prepayment penalty, which is assessed against the borrower for paying off the loan early.

It was after 9-11 when the Federal Reserve lowered interest rates to help the economy, said Jim Elder of ElderAdo Financial. With rates around 3 percent, mortgage brokers were recommending adjustable rate mortgages. However, interest rates started to increase and borrowers couldn’t get away from their increased rates and monthly payments.

 “They adjust and weren’t adjusting in a manner consistent with the market. Too many people got into it and now are at a point they can’t afford (the rates),” he said.

There are now thousands of different loans which fit the lifestyle of every American, which Allen says is a mistake.

The government has realized the problems these subprime loans have caused, both to the working family and the economy. As a result, several state and federal laws have been changed and created. One law requires all lenders to be certified, so that not just anyone can hand out money. In dealing with foreclosures, the statutes changed to provide more time before the sale of a home, instead of after, for the owner to catch up on his/her payments and redeem the home, Montrose County Treasurer Rosemary Murphy said.

However, for many it’s too late.

“Unfortunately its closing the barn door after the horse gets out,” Allen said.

Foreclosures vs. housing market

Murphy said the county’s foreclosure numbers are not in just one area or in one price range, but spread across the market. In the same way, they don’t affect just one area of the housing market.

“As subprime mortgage lenders scramble to protect their bottom lines, we need to redouble efforts to protect American families and communities who are at the losing end of this mess. The subprime mortgage meltdown has economic consequences that will ripple through our communities unless we act,” U.S. Sen. Charles Schumer, chairman of the Joint Economic Committee, said.

According to the committee’s report, each new foreclosure could impose $80,000 in costs to families, communities and businesses.

Foreclosures not only cause a drop in the average price of homes, they also expand the housing inventory. And when talking about the housing market, there are still many other factors besides foreclosures that need to be considered.

“You have ups and downs in the real estate market,” said Phelps.

From 2002 to 2005, Montrose County saw a large steady increase in sales, including single-family homes, vacant land and commercial property, according to a 2007 year-end real estate analysis by Lynn Vogel of Comparable Sales Research.

The total dollar sales also increased significantly during that time. Between 2003 and 2004, the total dollar sales growth rate in the city of Montrose was at 58.83 percent. That growth rate was high again between 2004 and 2005 at 29.99 percent. However, data shows Montrose, city and county, started to fall after 2005.

“Our adjustment started in 2005,” said Vogel. “It doesn’t mean it’s bad, it’s just falling off.”

This is consistent with the data on the number of single family residential sales in Montrose County, which between 2002 and 2003 had a 31.97 percent growth rate; 24.59 percent in 2004; and 9.06 percent in 2005. However, in 2006, the growth rate was only 1.74 percent and between 2006 and 2007, that growth rate dropped to negative 22.50 percent.

Though the drop was significant, it brings sales to the same level seen in 2003.

“This would be a good indicator to watch to see when the fall off in the market is beginning to end,” the report states.

Although Montrose’s housing prices have declined overall, the median sales price for a single family home has leveled off, which Vogel said indicates that sales have been strong in the lower end of the market throughout the county in 2007.

The median price for a home in 2007 was $191,000, a slight increase from 2006 median of $187,750.

A majority of home sales happen in the $151,000 to $200,000 range in the city of Montrose in 2005, 2006 and 2006. Previously, the majority of sales where in the $101,000 to $150,000 range.

Phelps said in the last six months there was still a good market under $200,000. She said homes between $130,000 and $165,000 are being “nabbed” fast.

Where the area is seeing the largest inventory, according to Phelps, is in the $240,000 to $325,000 range. However, Montrose has a larger-than-normal inventory in all areas. Phelps said she heard there is a five to 10 year build-out in the county.

Last month, she saw four sales in the $500,000 to $700,000 range, a significant number for this price range. However, she said these buyers are most likely not affected by the economic strains which are affecting other potential homebuyers.

“A lot of people move here and want to buy a home, but it’s hurting because they can’t sell their home in California, the Front Range,” Phelps said.

“I don’t think this will go on forever,” she said. “People in this country will continue to want to buy a home — that is the American Dream ... they’re being more cautious.”

Contact Kati O’Hare via e-mail at katio@montrosepress.com

Helpful tips

When achieving the American dream: Tips from Merle Allen, director of counseling for the Grand Valley Housing Initiatives, a HUD certified housing counseling agency.

-The most important thing anyone can do is first understand how much home they can buy.

-Put together a budget. How much can go towards the purchase of a home and don't move from that number.

-Remember that what lenders look for is different than what consumers should look for. Lenders look at gross income and usually will approve a person for a loan that is much higher than what they can afford. Consumers need to look at their net income because that is what they actually have to spend. Then figure other debt out of that number. Figure a "comfortable" monthly payment which includes a program (escrow) that includes monthly payments for property taxes and insurance.

-Remember you'll be a homeowner and with that comes addition expenses such as failed appliances and maintenance work. Make sure you are going to be able to save, which again means a comfortable mortgage payment. If you are not able to save money, you'll be hard pressed to pay for the investment you spend so much time and hard work for. (This is how many fall into foreclosure.)

-If you aren't totally sure about buying a home, talk to a certified housing counselor. They will be able to walk you through the step and they don't have a invested interest like lenders do. If you ask a salesman if a certain car is good for you, of course he is going to say yes.

-The smartest thing anyone can do is to go to a home buyers education class. Though it's six hours out of your day, it's free and provides valuable information in searching for a home, paying for that home and refinancing. The class is just as important for second-and-third time home buyers or refinancers.

-Think twice about getting a home equity loan, you could be taking out more than your home is worth. As housing prices are decreasing, many people are in foreclosure because they did just that. Look at your home as more of an investment and less as an ATM.

- The HUD Web site at www.hud.gov is a good resource for tips and information on buying a home.

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