In this photo taken Monday, May 24, 2010, a gardener cuts the grass at a bank owned foreclosed home in Palo Alto, Calif. Sales of previously occupied homes dipped 2.2 percent in May, suggesting that a boost from government home-buying incentives is winding down earlier than expected.(AP Photo/Paul Sakuma)
The Calhoun County Probate Office reported 117 foreclosures in the area during the second quarter of 2010, which included 45 in April, 29 in May and 43 in June. The previous high of 113 occurred during the first quarter of the year, which included 25 in January, 40 in February and 48 in March.
The first peak in foreclosures came in the second quarter of 2008, when 107 homes were lost.
In contrast to the 2010 numbers, foreclosures decreased throughout much of 2009.
Anniston bankruptcy attorney Doug Ghee said his office has worked many foreclosure cases in the past year.
“We have noticed an increase in foreclosures over the last 18 months,” he said.
Leonard Zumpano, professor of finance and Association of Realtors chair of Real Estate at the University of Alabama, said several factors could be driving the rise in foreclosures.
“It may be that unemployment has gone up in the area,” Zumpano said.
Unemployment rates in the county have remained relatively high this year –- hovering in the 10 percent range –- and above the national average, which has stayed below 10 percent during 2010.
Ghee said his clients have expressed several reasons why they were forced to foreclose on their homes.
“Some people have been laid off from their jobs,” he said. “People express the desire that they would rather be working and paying bills than going through bankruptcy, but unfortunately that isn’t the case.”
Zumpano said a continual drop in home prices has also caused many foreclosures.
“It could be that more loans are underwater,” he said.
Underwater is a term applied to homes worth less than their mortgages.
“That typically causes some people to walk away from their loans,” Zumpano said. “They are facing a negative equity situation.”
Ghee said the underwater affect has forced many of his recent clients into bankruptcy.
“A lot of them express the opinion that they owe more on their loans than the property is now worth,” he said.
According to the latest statistics from the Alabama Center for Real Estate, average home prices in the county dropped from $113,144 in April to $108,836 in May.
Everett King of ERA King Real Estate in Anniston, however, said foreclosures are not the main reason for the decrease in county prices.
“They are not really hurting the average price because the average foreclosures here are on the low end, around $86,000,” King said.
Most first-time, entry-level homes cost around $100,000.
King said many of the recent foreclosures in the area were cheaper, rental-type places.
Instead, much of the recent local drop in average home prices is because the federal first-time homebuyer tax credit ended in April, King said. Home sales increased after the federal government instituted an $8,000 tax credit in De-cember for first-time homebuyers as a way to stimulate the market. The drop in demand after the tax credit ended caused prices to drop.
Zumpano noted that pay-option adjustable-rate mortgages or option ARMs, may also be impacting Calhoun County’s foreclosure rates. Zumpano said option ARMs were popular and profitable loans for banks for much of the decade, especially during 2004 and 2005, when the housing market began to collapse.
An option ARM loan gives a borrower the option of paying less than the interest due, causing the loan balance to rise. If it rises too much, the opportunity to make a low payment vanishes and the required payment skyrockets.
Ghee said interest rates have been a problem for some of his clients.
“They are having extremely high interest rates … they can’t make ends meet,” he said.
Contact staff writer Patrick McCreless at 256-235-3561.
