Ames foreclosure rates are on the rise but are lower than national averages.

The diminishing economy began taking its toll on the Ames real estate market in the past year. Foreclosure rates are increasing and residents are having difficulties paying off mortgage loans. While property values have been increasing, the number of sales has been decreasing.

“It’s been the culmination of a longer period of time than even just last year, as far as the foreclosure rates,” said Russel McCullough, lecturer in economics, liberal arts and sciences, and real estate broker with Gateway Real Estate, 119 Stanton Ave. #201.

“Quite frankly, there’s been people who’ve been able to buy houses that maybe weren’t financially ready to be into home ownership, and so that’s where a lot of our foreclosures have been rising,” he said.

According to data from the First American CoreLogic on foreclosures for the Ames area, the rate of foreclosures among outstanding mortgage loans was 0.66 percent for the month of July 2008, compared to 0.56 percent in July 2007.

According to realtytrac.com, seven properties were foreclosed in Ames in the last year and 16 are now owned by banks.

The national average foreclosure rate is 1.6 percent for July 2008, a 0.94 percent difference from the Ames average.

McCullough does not think high foreclosure rates will hit Ames like they have the rest of the nation.

“I think a lot of people in Ames were qualified for their loans, so I don’t think we’re going to see the foreclosure rates here in Ames like there has been around other parts of the nation,” McCullough said.

McCullough said institutions such as Iowa State and the Iowa Department of Transportation have kept Ames more isolated from national foreclosures. He said having a stable income base helps keep housing stable.

According to First American CoreLogic, 1.62 percent of mortgage loans were 90 or more days late in July 2008 compared to 1.21 percent for July 2007.

Dave Swenson, associate scientist in economics, agriculture and life sciences, said the increase in the number of late mortgages indicates residents in danger of foreclosure, but how soon foreclosure will occur depends on location.

“Eventually, you get enough late mortgage payments, you’re just forced into default and foreclosure,” Swenson said. “Iowa has much more strict requirements. It takes longer to go from default to foreclosure than it does in much of the rest of the country.”

Property values have increased in Ames in the past year. The LoanPerformance Home Price Index provided by First American CoreLogic indicates that home prices in the Ames area have increased by 1.35 percent from July 2007 to July 2008. According to data from the Ames Multiple Listing Service, the average home sale price from Jan. 1 to Sept. 30, 2008, was $182,681. The average home sale price for the same time period in 2007 was $179,709.

“You get that kind of speculative behavior in places where there appears to be a strong and continuous demand for new housing,” Swenson said. “The state of Iowa is only growing at just a quarter of the rate of the rest of the nation.”

McCullough said because credit was easier to get, demand for housing increased. The demand drove home prices up, creating a “bubble” that started to burst when foreclosures became more frequent.

“The standards that used to be there for underwriting banks changed and loosened up and there were a lot of people getting into homes that maybe shouldn’t have been,” McCullough said.

According to the Ames Multiple Listing Service, fewer property sales transactions were reported for 2008. From Jan. 1 to Sept. 30, 2008, 475 sales were reported. For the same time period in 2007, the number of sales reported was 542.

According to First American CoreLogic, home sales have decreased 23 percent nationally in the past year.