Low Foreclosure Rate Makes Albuquerque a Healthy Market for Home Equity

By Richard Barrington
Local Lender Columnist
Sep 1, 2008
A little weakness in housing prices can be a good thing for buyers, but too much can go too far. After all, when prices slip a little bit, it can present an opportunity to buy into a market at bargain prices. However, when prices go into a free fall and home equity values disappear, foreclosures rise and it becomes difficult for new buyers to get a home loan as mortgage companies tighten standards. Housing in Albuquerque is an example of what is sometimes referred to as a "Goldilocks market": not too hot, not too cold, but just right. This type of market keeps home equity values and mortgage companies in good shape, but still leaves the door open to new buyers.

Conditions in Albuquerque

Conditions in Albuquerque contrast markedly to those in much of the country, where real estate and mortgage markets have been in something of a vicious cycle. Foreclosures force more properties into the market, pushing values down. Tighter lending standards keep buyers out, decreasing demand for homes, which reduces values further, which causes an increase in foreclosures….This can make buying even foreclosed properties a risk in many markets, as these conditions have precipitated sharper drops in prices.

Albuquerque, on the other hand, has been cited as a good market in which to shop for foreclosed properties, again because of those "Goldilocks" conditions: enough foreclosures to create some deals for buyers, but at a slow enough rate that it hasn't destabilized the overall market.

Impact on Home Equity and Mortgage Companies

Housing conditions impact more than just new buyers, and the relative health of the Albuquerque market is good news for both existing homeowners and mortgage companies.

For existing homeowners, a stable market means that home equity loans are still a viable option, as home equity values have not been completely eroded away by falling prices. For mortgage companies, fewer foreclosures means a greater proportion of healthy loans, which means more capital is available to be put back into new home loans.

Long-term Attributes

The health of the Albuquerque market is not a fluke, since it is based on several positive long-term attributes. In 2006, Kiplinger's identified the region as one of the top 10 smart places to live in the United States. While real estate prices remain modest, the economy is thriving. The climate continues to attract retirees, while a diverse group of employers continues to create jobs, including valuable high-tech positions.

It is unlikely that any area of the country would be completely unaffected by the real estate slump, but the relative stability of Albuquerque property values suggests that this is a healthy market to buy into for the long term.

Source:
USA Today

About the Author
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.