Coast spared mortgage crisis
Sunday, January 06, 2008
By VETO F. ROLEY
PASCAGOULA — While the sub-prime mortgage crisis threatens to undermine housing markets across the United States, a leading real estate professional in Jackson County says effects from the crisis are muted along the Gulf Coast.
Mortgage lenders along the Gulf Coast were more conservative in their lending practices and did not make the number of sub-prime loans others in the nation have made, according to Mark Cumbest, owner of Cumbest Realty and chairman of the Mortgage Advisory Committee of the Association of Real Estate Law Officials.
Cumbest also said the housing market along the Coast, particularly for affordable housing, up to about $150,000, remains strong as the area rebuilds from Hurricane Katrina.
The sub-prime crisis is a result of mortgage companies making loans to borrowers with substandard credit ratings. Many of the loans were made using adjustable rate mortgages.
“We haven’t suffered as other areas have suffered from the sub-prime crisis,” Cumbest said, who is also chairman of the Mississippi Real Estate Commission. “We haven’t seen the abuse (from mortgage lenders) along the Coast that have been seen in other areas of the nation.”
The one drawback along the Coast, Cumbest said, from the sub-prime crisis is that borrowers with below average credit will have a more difficult time of finding a mortgage as lenders become more “particular” to whom they make loans.
“Someone with good credit and adequate income to pay the note will be able to obtain a mortgage,” he said. “The high-grade borrower has never been an issue. The very principle of making a good loan is to have a borrower with good credit, who has a job that provides verifiable income to pay the loan off and good collateral, a land or home at the value of the loan.”
Cumbest said he has always been a proponent of fixed-rate interest loans. “They provide a payment that you can budget and plan for,” he said.
He said if someone finds themselves having difficulty repaying an adjustable rate mortgage, they need to contact their lending company and see if they can refinance under a fixed-rate loan.
Cumbest also noted that interest rates are continuing to remain low, with the Federal Reserve Bank expected to keep interest rates low in the near future.
“I’m telling my customers and clients that now is the time to buy,” he said. “There are a lot of local lenders in the market that are offering mortgages.”
Part of the strong market, Cumbest said, is a strong demand for housing, particularly affordable housing.
“There is a huge demand for affordable housing,” Cumbest said. “There are a lot of people looking for homes they can afford.”
Cumbest defined affordable housing as housing options that people working regular jobs can afford, houses that cost $150,000 and less.
Because of the demand for affordable housing, Cumbest said that moderately-priced houses along the Coast are holding their value, unlike many areas of the country where housing prices are declining.
In addition to strong demand for affordable housing, Cumbest said he is seeing more developers build housing in the range of $150,000 or lower.
“That is where the demand is,” he said.
While demand for affordable housing remains strong, Cumbest said demand for higher-end housing is flat along the Coast. He also said prices for many properties have declined since Katrina.
“There was a spike after Katrina,” he said.
Cumbest said economic growth along the Coast created a strong demand for housing before Katrina hit. Katrina destroyed a lot of housing, in all ranges of affordability, which caused the supply of housing to go down in the face of high demand, he said.
Added to a native need for housing, Cumbest said a number of speculators from across the United States came to the Coast. He said they made options on properties at high prices, which caused prices to go up. However, he said, many of those options were not exercised and the property is back on the market at a more reasonable price.
“The market has corrected,” he said, saying the market is now a much more “normal” market than it was in the year following Katrina.
Still, he said, real estate prices are strong across the Coast because of the pent-up demand of property prior to Katrina. He said that was true across residential, commercial and industrial areas.
Reporter Veto F. Roley can be reached at [email protected] or by calling 228-934-1427.
