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Prime, luxury-housing developments along the Atlantic Ocean seem little affected so far by the housing market downturn, but state officials say home foreclosures are slowly creeping toward the beach.
Further inland, it’s the Cape Region’s year-round, working-class families – many of whom provide services to second homeowners – that are hardest hit. They are suffering from foreclosure rates that have nearly doubled since last year.
In rural areas, families are increasingly fighting to keep roofs over their heads.
“The numbers, I suspect, will increase in the hot areas,” said state Banking Commissioner for Consumer Affairs Gerry Kelly. Kelly referred to Seaford, which has the highest concentration of subprime loan default rates in Sussex County, including increased rates for Laurel, Georgetown and Milford.
In western Sussex County, many families face the brunt of subprime loan defaults, which clash with low-wage jobs. In 2006, there were 97 foreclosure filings. This year, 170 foreclosures were filed in the county, said Kelly. “Statewide, Sussex County is where the filings are growing the fastest,” he said.
However, state officials have recently started to track the more commonly considered resilient beachfront developments, which are investor-centered business ventures.
“It’s starting to move toward the beach. People are suffering all over with the same problems. The assets are not as liquid as they once were,” he said. “Overall prices are still high, but the inventory is also high unless you’re in a prime market. Whether it’s investor-driven foreclosures or homeowner-driven, we’re looking into that.”
He said officials are examining real estate fluctuations based on ZIP codes as foreclosures creep closer to the shore. “Some investors may be overextended, but that may become clear over the next year or so. They’re not seeing the profits,” he said.
The Sussex County Sheriff’s Office is also reporting home foreclosure sales that have nearly doubled over the past two years. In 2005, said Sussex County Deputy Sheriff Steve Smyk, 268 homes were sold at sheriff’s sales, but this year already 418 homes have sold at auction.
Realtors respond
Housing advocates, elected officials and roughly 60 real estate agents attended the first housing summit, Tuesday, Nov. 6, in response to a lack of affordable countywide housing. The Georgetown conference, sponsored by the Sussex County Association of Realtors, supplied plenty of grim housing-market statistics, but business leaders also presented tips on avoiding foreclosures in what they call an overinflated market exacerbated by defaulting subprime loans and home affordability gaps.
“We’re trying to keep people in their homes; that’s what this is all about,” Kelly said.
Association President Rob Harman said the growth in the Cape Region is a double-edged sword. “Sussex County growth is like it’s never been, but we’re suffering from our own success. Income has not kept pace with real estate prices,” said Harman.
The median-priced home is about $260,000, but local residents with dual incomes only make about $50,000 a year, he said. “We need to put resources together to bring those two ends together,” said Harman.
Ruth Briggs King, Sussex County Association of Realtors (SCAOR) executive vice president, said that while the problem began with subprime lending defaults, low wages are forcing people out of their homes.
About 75 percent of Sussex County’s residents agree an affordability crisis exists in the county, according to a May 2007 real estate association survey, said King. Roughly 80 percent of those polled said more affordable homes to buy or rent are needed for teachers, firefighters, police and other people who work and live in Sussex County year-round.
“We need to ensure we understand what resources and programs already exist and to leverage these programs to best use,” said King, noting she’s seeing more of this type of business than ever before.
Numerous website addresses, housing counselors and information were made available for agents and consumers, who filed into the conference seeking advice later in the evening.
Agencies intervene
Virgilio Camey, a Guatemalan mechanic, just bought his first home in Milford. With the help of SCAOR Diversity Committee Chairwoman Trina Joyner and housing counselor Lucia Campos, Camey is able to manage his mortgage payments.
Campos heads the Dover-based National Council on Agricultural Life & Labor Research Fund. She helps many Spanish-speaking clients find and keep homes through foreclosure prevention and prepurchasing housing counseling. In addition, she provides support to 12 Cape Region nonprofit associations to help educate first-time homebuyers.
In the past five years, she helped close almost 400 home sales – most of them to people below the county’s median income level. Through financial literacy programs for English- and Spanish-speaking homeowners, Campos helps people keep their houses in the face of increasing foreclosures.
U.S. Department of Agriculture Rural Development Delaware/ Maryland State Director Marlene Elliott is working with the Milford Housing Development Corp., where families help each other build neighborhoods.
Carriage Place in Georgetown is finished. Next week, Cedar Creek Landing in Lincoln will be unveiled, and her agency is looking to develop similar communities in either Seaford or Bridgeville. Her agency also offers low-interest direct loans, in some cases, with no down payment.
“All of us sitting in this room know that all of our hard-working Sussex County families can’t afford a $200,000 home, even though some mortgage limits increased. The problem is finding a house they can afford within their income limits,” said Elliot.
Government responds
Director of Sussex County Community Development & Housing Bill Lecates said county officials took steps years ago to combat the lack of affordable housing. It wasn’t until 2006, however, that council passed an ordinance designed to expedite developer plans that include affordable housing. Developers are also given higher density allowance for including affordable housing in their projects.
Soon, he said, the pilot program will produce 400 affordable units at the Villages of Elizabethtown in Milton, but prices for those affordable homes vary between $160,000 and $222,000 – slightly below median home prices.
He said moderately priced homes are for those with incomes between $31,000 and $70,000, but no moderately priced developments have been proposed yet.
“We do have a wage problem; that’s our biggest concern,” he said. “Our goal is to close that gap so we can put our youth in those homes.” In the past week, Lecates hired Brandy Bennett as an affordable housing coordinator for the county.
Community land trusts
Van Temple, executive director of the newly formed Diamond State Community Land Trust, proposed a new manufactured home owner community for the Laurel area. In that model, he said, land lot rents are fixed, and the land is owned by the entire community. Residents own their own homes that are kept affordable through a one-time subsidy. However, owners cannot turn over homes quickly. “It creates an inventory of permanently affordable homes,” said Temple. Nationally, he said, there are about 200 community land trusts, and none of them have been affected by widespread foreclosures.
Regulation drives costs
Kevin Burdette of McCrone Inc. said government overregulation drives housing costs up. Local governments, which used to pay for inspections, now require developers to pay for them. Private companies also pay for traffic impact studies - in some cases as high as $20,000 - which increases housing costs, he said. He urged less government intervention and warned real estate agents about hidden costs. “Ask legislators if they understand the ramifications,” said Burdett.
King said she hopes young, local graduates who seek higher education outside Sussex County will return to the Cape Region with new skills. “Let’s hope our youths come back to live and can afford to,” she said.
For more information contact the Delaware Emergency Mortgage Assistance Program at brianr@destatehousing.com, or call 888-363-8808; or call The Sussex County Association of Realtors at 855-2300.
Contact Kevin Spence at kevin-spence@hotmail.com
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