The bursting of the housing bubble of five years back has had a strong impact on the Eastern Panhandle and Jefferson County in particular, but has while left much of the rest of the state untouched, according to a housing index report released late last year.
In the Eastern Panhandle, home values have fallen precipitously – though the trend seems to be leveling off. In Jefferson County, the average home has lost 23 percent of its 2009 value – 18 percent in Berkeley County.
The state as a whole, however, seems largely unaffected. The report shows that state-wide home prices actually increased by a little over one percent over the last three years.
“The report shows that the state-wide (home) values are staying about the same,” Senator Herb Snyder said.
The effects have mostly been seen in the Eastern Panhandle because it was one of the few areas of the state that was part of the housing boom that preceded the recession.
“Anybody and everybody was getting a home mortgage at any value that they could talk the people into paying – not paying much attention to what the home was actually worth. Some people, quite frankly, paid too much for their homes. It drove the housing values up tremendously,” Snyder said.
The report was the third in a series produced for the state Legislature’s Joint Committee on Government and Finance. The three reports track the average prices of homes at the point of sale for each of the 55 counties in West Virginia during 2009, 2010 and 2011.
When the bubble burst, the local real estate market was flooded with foreclosures, driving down prices.
“We could not live on top of that hot housing bubble for very long, and when it popped it was painful. It put a glut of houses on the market – an awful lot of foreclosures,” Snyder said. “If you are in a subdivision where one or a number of homes have been foreclosed on, it drives the sale values on those homes down, which drives down the values in the entire neighborhood.”
Snyder said declining home prices have had a wide-ranging impact on local governments.
“These numbers reflect what went on with (layoffs of) teachers,” Snyder said. “As these values fall, the amount of revenue for the school system, at least through the excess levy, is less.”
Since the state defines affordable housing in terms of price – rather than in terms of the income of the purchasers – the decline in prices could also change what properties qualify for the affordable housing exemption to the impact fee. The County Commission has not yet implemented the exemption, which was mandated by state legislation.
Snyder said many proposals surrounding the homestead exemption and locality pay are also based on the numbers presented in the yearly report.
Snyder sees some positive signs in the report as well.
While Jefferson County home prices declined 17 percent between 2009 and 2010, they declined 7.5 percent between 2010 and 2011.
“(Housing) will come back up. When we were on the top of the housing bubble, when our property taxes went through the roof, that was artificial. I think we’re getting back to normal values where they probably should be now. It will level off,” Snyder said.
Snyder said he has introduced Senate Bill 551 to try to increase the ability of citizens with upside-down mortgages to refinance. Under current state banking law, banks can only lend an amount equal to the appraised value of a home.
“With these values falling people got trapped,” Snyder said. “If you paid … $298,657 two years ago and then wanted to refinance today, it would only be worth $229,261. Well, you probably owe a lot more on the house than that. Banks were forbidden to lend more than 100 percent of that new value.”
Snyder says this has left some homeowners who would otherwise be able to refinance at record low interest rates unable to take advantage of federal refinance programs.
“As soon as this law passes, you’ll be able to qualify for those loans,” Snyder said, though he pointed out that only those with federal home loans would qualify.
Snyder said he is cautiously optimistic that hone prices will not fall much farther.
“I don’t have a crystal ball. There has been another round of foreclosures. It seemed to happen the year before, and again this year. The assessor tells me there seems to be another round of foreclosures that could drive these numbers down more – but I wouldn’t think it would be substantial.”