Lynchburg-area housing market struggles

By Bryan Gentry

Published: July 15, 2008

Struggles in the national housing market began to hit home in the Lynchburg area during the first half of 2008.

Data from the Lynchburg Association of Realtors show home sales slowing. Foreclosure rates, meanwhile, have increased. Also, volatility in the financial markets is leading to stricter lending standards and more expensive mortgage insurance premiums for some buyers.

Local lenders said tighter credit standards have recently gone into effect, but it remains to be seen whether troubles with mortgage giants Fannie Mae and Freddie Mac will make it harder to buy a home.

Betty Burch, president of the Lynchburg Association of Realtors, said homes are on the market longer in 2008 than in 2007. Though the average price is up slightly, sales are behind.

She said 920 homes have sold in the Lynchburg Multiple Listing Service area this year - a 19 percent drop from the 1,138 sold in the first half of 2007.

That’s an improvement from the first quarter of 2008, though, when sales were down 25 percent from the year before. At the end of 2007, sales for the year had been down only 7 percent.

The price of homes sold continued to increase over the first six months of this year. The average price was $177,843, a 2.7 increase from the same period in 2007.

“People do seem to be getting more for their houses. It just appears that it is taking a little bit longer,“ Burch said.

On average, homes sat on the market 112 days, compared to 99 days last year.

Burch, who has nearly 20 years of real estate experience, said she’s never seen homes sit on the market so long. She said the rise in food and gasoline prices could bear the blame.

“I think (potential home buyers) are in such shock that food has gone up so much and gas has gone so much, it’s hitting them,“ Burch said. “It’s preventing many people from making major purchases.“

While “For Sale” signs are staying in front of houses longer, foreclosure has been on the rise in the Lynchburg area.

The number of homes with foreclosure filings in the region is still well below the national foreclosure rate, but has increased nearly 70 percent since a year ago.

The Lynchburg area had 57 foreclosure filings in the first half of 2008, compared to only 34 during the first six months of 2007, according to RealtyTrac, a California-based company that eyes foreclosure activity.

Foreclosure activity tripled in Bedford County. The county had 21 foreclosure filings from January through June this year, compared to six in that time last year.

Foreclosures were also up in Lynchburg, Bedford city and Campbell County. Appomattox and Amherst counties have actually seen decreased foreclosure activity.

Since the national foreclosure rate took off last year, some lenders have become more wary, creating a lending market that requires more money up front and better credit ratings. Those stricter credit rules are applying to some buyers in the Lynchburg area.

“Credit standards continue to tighten,“ said Billy Woolridge, manager of the Lynchburg Branch of Mason-Dixon Funding. “It’s almost like hitting a moving target every day.“

He said mortgage insurance - also termed default insurance - is becoming more expensive. On Monday a Federal Housing Administration rule came into effect, raising the up-front mortgage insurance premium for customers with credit scores under 600.

Woolridge said he’s never seen the FHA charge different premiums for different customers in his 25 years dealing with real estate.

Brian Cash, manager of the mortgage division at Bank of the James, said only a few government programs now finance 100 percent of a home’s price. Every other program requires a down payment.

He said the market has been tight, even before lenders Fannie Mae and Freddie Mac hit troubles recently, losing half their stock in one week.

He said no new credit restrictions have been announced in light of those troubles. It could be the federal government’s offer to loan money to the companies could help.

“In some ways the government step-in may restore some confidence,“ Cash said. “I think eventually, in the long term, it may be a positive.“