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No mortgage crisis here
Decatur’s housing market unaffected by national increase in foreclosures

By Evan Belanger
evanb@decaturdaily.com · 340-2442

As news of Wall Street’s mortgage crash stunts housing markets across the nation, Decatur’s local home market remains unscathed — at least for the moment.

Since late last year, the U.S. mortgage market has seen an alarming increase in foreclosures.

Analysts say lenders have invested too heavily in the high-yield, high-risk sub-prime mortgage market — a business that typically caters to those who can’t afford mortgages — and now they are paying the price.

As lower start-out interest rates expire, would-be homeowners are defaulting in unprecedented numbers. That means more foreclosed properties are hitting the open market than ever before. The increasing supply is pushing fair-market prices down; lenders are finding it difficult to get their money back from the repossessed homes.

More than two dozen sub-prime mortgage companies have called it quits or filed for bankruptcy, pulling more than $6.5 trillion from the marketplace.

Experts say the crash could stagnate the housing market, forcing an increase in interest rates and negatively impacting other parts of the economy.

Despite the ominous predictions, Decatur’s market was steady as July ended. Local foreclosures for the month were down 6 percent from the same month last year and down 29 percent from July 2005.

Kim Hallmark, president of the Morgan County Association of Realtors, said home values are also holding steady when compared to previous years.

Philip Shelton, president of the Greater Morgan County Home Builders Association, said available interest rates for qualified borrowers continue to be low, about 6.5 percent.

“It’s my impression that we’re not as affected here, and that’s usually the case,” he said. “Typically, Decatur is a very conservative building area.”

All those factors reflect well on the Decatur area, said Barry Morris, economics chairman for the University of North Alabama in Florence. It could mean that local lenders have been more responsible with their money, investing less in the sub-prime market, Morris said.

“My feeling is that the whole crisis, such as it is, is being overblown, and that it will simply work itself out over time,” he said.

Morris also pointed out that economically North Alabama is doing well compared to the rest of the country, which could be driving the local home market despite the crash.

In recent weeks, two foreign companies, Thailand-based Indorama Polymers Group and Canada-based National Steel Car Limited, announced they will build plants in North Alabama, spending $510 million and employing more than 1,900 people.

The incoming plants are expected to further increase the demand for local housing.

In addition, nearly 10,000 more people are expected to move into the Huntsville area by 2011, part of the government’s Base Realignment and Closure program

Morris said all of the factors will likely power the local economy through any slouch in the national economy.

“We happen to be in a part of the country that was in the economic doldrums with a high unemployment rate for a long time,” Morris said. “Now, our economy is starting to be healthy again.”

Despite the positive economic indicators, there is still one sign that Decatur’s housing market may be slowing.

According to the Decatur Building Department, permit applications for new homes and condominiums dropped 30 percent from 2004 to 2006. That compares to a 48 percent increase in permit applications in Huntsville for the same time period.

Much of that increase is attributed to BRAC.

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