By Cornelia de Bruin
Triplicate staff writer
A dismal chapter in Del Norte County's relatively recent history may have morphed into a positive factor for the current real estate market.
While reports regarding the national economy range from the dire to the spacey, local real estate agents say it's unlikely that the national trends will be felt in Crescent City's real estate market.
"I don't expect the national trends to filter here," said Ming Tree Realty real estate agent Patti Beesler.
The trends at work nationally are a recent half-percentage point increase in 30-year mortgage rates as lenders crack down on subprime lending standards.
Subprime loans are those made to buyers whose credit does not qualify them for a conventional loan those with bad or limited credit histories.
The result is more expensive long-term loans and a more limited field of buyers. It's a combination that prompted the National Association of Realtors to tell the finance magazine Bloomberg recently that the nation is poised for its first annual decline since the Great Depression.
Nationally, investment banks, insurance companies, pension funds and asset-management firms that hold some of the nation's $6 trillion of mortgage-backed securities have not yet felt the effects of subprime loans gone bad, stated a June 20 article published by Bloomberg.
Subprime mortgages account nationally for about $800 billion of the market.
But in Del Norte County, unlike other areas of the country, the disappearance of key components of the local economy happened several decades ago.
"The people in the worst areas are living where factories are closing, or businesses are shutting their doors or moving overseas," Beesler said. "Del Norte County has been there, seen that; we've lived through it before."
The county's big employers are "still solid," Beesler added.
"I don't know about an expansion at the prison," she said, regarding California Department of Corrections Pelican Bay Correctional Facility. "But Home Depot is doing very well, and so is Ace."
Del Norte County's Community Development department has issued 316 building permits between Jan. 1 and June 28. Fifty-seven of them were issued during May.
But the mere number doesn't tell the story. To put flesh on the bones of the story, at least eight new subdivisions have either broken ground or are about to another bellwether for the local economy.
"The builders aren't afraid," said Beesler. "They are going forward."
A second yardstick used to measure a housing market's health is the number of adjustable rate mortgages offered to its home buyers.
Adjustable rate mortgages are those not locked in to a particular percentage of interest. Rather, they fluctuate in harmony with the national economy. Nationally, about one third of mortgages offered during the past three years are ARMs.
Economists say that the recently raised mortgage rates and stricter lending standards will prevent owners of ARMs from refinance into fixed-rate loans.
Not many ARMs are offered to Del Norte County borrowers, Beesler said.
"Buyers using ARMs are mis-advised," she said. "Ming Realty tries to get people in (to properties) with payments they are comfortable with now."
She added that "probably" most of the local real estate companies are hones with their customers regarding the amount they can realistically spend for a purchase.
"But you still need to be an informed buyer," she said. "If your agent doesn't make you think about a purchase, get a new agent."
Adjustable rate mortgages that cannot be refinanced, the loan's interest rate can increase even when the value of their property is decreasing. The combination forces them out of the property, either via a sale of through foreclosure proceedings.
ARMs are not the only culprit that triggers a foreclosure; myriad other influences can, and do, play into the loss through foreclosure of a property.
County Clerk Vicky Frazier said her office issued 65 notices of foreclosure from Jan. 1 to June 21.
The number seems higher than normal to Kirk Brown of Crescent Land Title Co.
"It's a little higher than we have been seeing," Brown said. "It's possibly due to subprime loans and property values that have dropped."
Not all of the 65 notices may have ended in actual foreclosure. The county does not track that number.
Brown noted that the real estate market is now "a buyer's market."
"It's dead compared to three years ago, there's no more buying and flipping," said John DeGemis of Redwood Coast Realty.
But DeGemis pointed out that the local market has also had flat periods that people used to consider normal less than a decade ago.
"Consumer confidence is not as high as it was three years ago," he said. "People are worried about the war, gas prices and the economy."