High foreclosure rates do not indicate decline

James Heggen

A recent report shows foreclosures in Ames are on the rise, yet still below the national and Iowa averages.

CoreLogic, a provider of consumer, financial and property information, analytics and services, released numbers that show May foreclosures in Ames have doubled since last year, climbing to 1.61 percent from 0.81 percent. Iowa’s foreclosure rate was 1.93 percent, up from 1.47 percent last year. The national average was 3.15 percent, up 2.56 percent from last year.

The 90-plus day delinquency rate has also increased in Ames and throughout the country, climbing from 1.97 percent to 2.86 percent. This is also below the Iowa and national rates.

Peter Orazem, professor of economics and city councilman, said the foreclosure rates Ames is seeing now are “roughly” equal to the national average rate of foreclosures before the mortgage crisis.

“It’s still much higher than what Ames is used to,” he said.

He attributed the increase in foreclosures to the economy Ames saw last year. He said the economy in Ames “slowed noticeably” in the middle of last year, and a number of people lost their jobs in the private sector.

Orazem said foreclosures usually do not hurt the economy, but what has been hurting during this recession is the fact property values have decreased. However, Ames hasn’t seen much of a drop in this respect, yet.

“We may start seeing a reduction in the value of properties in Ames, and that’s going to have other adverse consequences for, say, the ability to borrow against home equity and other potential problems,” he said.

Nationally, with delinquency rates already peaking and foreclosures near the peak, Orazem said the mortgage market is going to start to firm up. He expects Ames to do the same.

However, Orazem believes the concern in Ames is that although the public sector has been a source of stability in the past, it may not be in the future.

Tom Randall, broker and owner of Tom Randall Real Estate Team, said he has been seeing more corporate and bank owned properties, as well an increase in short sales.

However, property values have not dropped like they have in other parts of the country.

“Are we feeling some of the impact of it, of course,” he said.

But Randall added that Ames is still doing better, in terms of less loss, than most of the country.