Foreclosures in Albuquerque Surged as Mortgage Rates Reset

by Peter Vernon on cities

Foreclosures in Albuquerque surged in January, as mortgages in the city reset to higher rates and the unemployment rate climbed up, according to local researchers and analysts.

The percentage of foreclosures in the city rose to 2.4 percent of all residential properties in the area, up from the January 2009 percentage of 1.4 percent. Despite the increase, foreclosure activity in the city was slower than the nationwide foreclosure percentage of 3.2 percent in January.

Local housing analysts said that although a huge majority of home loans written in Albuquerque were prime mortgage loans, most of the adjustable-rate mortgage loans written were already delinquent or foreclosed, as ARM borrowers could no longer afford the higher monthly payments when they reset to higher loan rates.

According to Bill Elliott, manager of the Albuquerque branch of Rocky Mountain Mortgage, the two major drivers of New Mexico foreclosures are unemployment and steep declines in home values. He added that the number of borrowers intentionally defaulting on their loans has been rising because of the sharp drops in home values.

Since the peak of the housing boom in 2007, home prices have fallen down by a total of 12 percent as foreclosures in Albuquerque dragged down the average home price in the city to around $214,662 in February.

For new single-family homes, the average price has been dragged down to $282,600 and the median price has been pulled down to $220,500. Despite the drop in prices, total sales of new houses plunged to 96,000 units and the time it took to sell a house shot up to 14.4 months.

According to IHS Global Insight economist Patrick Newport, while the sales of new houses plunged in February, the number of building permits for new single-family homes increased. This divergence in the direction of the numbers means that home builders were anticipating an increase in demand for new homes, but the demand has not yet materialized.

Mark Pando, head of the Greater Albuquerque Association of Realtors, said that despite the decline in new house sales and the drop in prices, the housing market in Albuquerque improved because of the increase in total home sales to 380 units. The total sales volume in dollars also shot up to over $80 million, up by almost 10 percent over dollar volume in February 2009.

As pending home sales increased compared to January, members of the realtor association hoped that foreclosures in Albuquerque will not drag home prices further down.

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