2006 foreclosure rates hint that it could get worse

The number of mortgage defaults by Carson City home owners increased 47 percent from 2004 to 2006, according to an investigation by the Nevada Appeal.

This leaves many experts wondering if the worst is still to come as interest rates adjust on risky mortgages following a period of heavy speculation and falling property values.

"This shows speculation in the real estate market in Carson City," said Alan Glover, Carson City clerk/recorder. "It was way overpriced and people got in on interest-only loans and 100 percent loans and got in way over their heads."

Glover said he believes it was mostly speculators who lost property in 2006, rather than families living in the home.

Some buyers went into risky home loans, which offered adjustable interest rates tied to certain indices or lower down payments, in hopes of quickly turning over the property for a profit. In late 2005 and 2006, these speculators ran out of buyers.

Low wages in a surging housing market can affect a home owner's ability to keep up with mortgage payments, said Cathie Jackson, branch manager with Mortgage Options Inc. If wages don't rise, property values must come down.

"I believe that's what we're going through right now," she said. "Something has to give."

Average home prices in Carson City this year have risen at a smaller percentage than in past years. The average cost of a single-family home in 2006 was $345,255, up only 2 percent from the previous year, according to a report released recently by the Carson City Assessor's office.

From 2003 to 2004 the average price of a home jumped 24 percent.

Fewer home owners in default were able to save their property, and credit records, before foreclosure. The Appeal's investigation, which analyzed data from 2002 to 2006 kept by the Carson City Recorder's Office, revealed a 30 percent decrease in the number of mortgage defaults paid off by the borrower before the house was foreclosed.

The Barretts, who now live in Chelsea, Ala., were one of those families who couldn't find a buyer for their Carson City home before it went into foreclosure.

"Our Realtor said the real estate market is so bad and Realtors are quitting, and we picked the wrong time to leave," said Judy Barrett, 65. After her husband, Raymond, lost his job, they put their Empire Ranch Estates home on the market in April 2005.

"We've had good credit all our life, and now we're going to get ruined because of the real estate market and the job market," she said.

The Barretts' home sold Thursday on the city court steps for $343,000, less than what they bought it for in 2003. They'll still owe the bank about $150,000.

The 2005 market saw fewer foreclosure sales, but in 2006 the number of foreclosure sales climbed back up. A housing expert said this shows that the market looked good for most of 2005, which meant that home owners could stay out of foreclosure by selling their properties or refinancing.

"In 2006, things got worse, most people shrugged their shoulders, they couldn't find a buyer, so they let the lender take it," said Tom Cargill, economics professor at the University of Nevada, Reno.

Price changes in the last year have many wondering what the future holds for home values. Bob Fredlund, an agent with Coldwell Banker Best Sellers in Carson City, said analysts will be watching foreclosure rates in the next year.

"I do believe we're going to see more defaults and foreclosures due to lending, the 100 percent loans and the ARMs (adjustable rate mortgages), because people are overburdened with interest rates that have gone up," he said. "I think for the next six months we'll be seeing that. Then we'll see how the economy does."

• Contact reporter Becky Bosshart at bbosshart@nevadaappeal.com or 881-1212.