Troubled by the banking industry and its former appetite to take excessive risks, Delaware’s housing markets are in the midst of one of the nation’s toughest real estate crashes even after the federal home buyer tax credit increased home sales for a time. The collapse of the housing market is especially hard hit in the southern half of the state, where foreclosures are climbing amid record mortgage defaults.
The scene in southern Delaware is coming to light with Wilmington Trust, founded in 1903 by the Du Pont family, the railroad barons. The Du Ponts helped to set up the Federal Reserve in order to protect bankers’ interests. Bank executives talked repeatedly about mortgage defaults in the southern half of the state increasing, especially in large housing newer housing developments they financed.
Wilmington Trust officials believed there would be a turn around in the economic downturn and poured money into real estate loans in record numbers from 2000 to 2008 when it finally became evident that a turn around in the real estate market was unlikely. Wilmington Trust alone is estimated to face losses of $534-million on its $1.68-billion new home construction portfolio and the estimate is only expected to rise. Foreclosures in Ocean City and along the coastline are projected to be the highest in the second home market.
Home sales were spurred by the federal tax credit for buyers in Wilmington only to slowdown after its expiration. Home values have been slipping in Delaware for more than three years as high unemployment makes it impossible for many homeowners to make mortgage payments. Other mortgage holders in Delaware see no end to being underwater on their mortgages and are walking away from homes, leaving lenders to foreclose.
The foreclosure crisis in Wilmington is projected to take a massive jump in 2011 as tight mortgage under-writing restrictions keep mortgage lending restrained except to only the best candidates for home mortgages. Average home prices are forecast to take a hit of 8.9% for the year.
Residential sales are also sluggish in New Castle County, where Newark is located. Despite near record low mortgage rates and lower home prices, the market is suffering through the downturn as if the federal tax credit never made any difference at all for its housing market in Newark. Sales should gain momentum by mid-year as prices decline to lower levels to attract more buyers. Newark is forecast to sustain average housing deflation of 8.6% in 2011.
In Dover, the capitol of the state home sales were higher for a time during the federal credit but then turned sluggish after the expiration. With only a few handfuls of sales a month it’s difficult to judge any sort of velocity in the housing market in Dover, but you can be rest assured that it will take a number of years for things to improve. Foreclosure sales will make up most sales over the next couple of years. Home prices are forecast to decline 7.3% for the year in Dover.
Sluggish sales are also hurting the market in nearby Smyrna outside of Dover. When mortgages started going bad in great numbers there was little bankers in the area could do other than try to work something out with the mortgage holder. As the foreclosure crisis reaches its peak in Delaware, bankers seem more reluctant to come to mortgage holders’ aid. Smyrna is forecast to sustain housing deflation that will average 7.8% in 2011.