August 21, 2009

Richmond Fed's Foreclosure Report Shows Mixed Conditions in West Virginia

Richmond, Va.

A report by the Federal Reserve Bank of Richmond shows that, on the whole, housing and labor market conditions in West Virginia have remained stronger than those in the rest of the nation. In communities whose housing markets are strongly connected to markets in the District of Columbia, Maryland, and Northern Virginia, however, house prices have fallen and subprime foreclosures have risen on par with prices and foreclosures in those neighboring areas. But limited data coverage and the prevalence of manufactured housing in the Mountain State make it difficult to fully understand housing conditions.

House prices in West Virginia didn't appreciate as much as in other areas of the nation, nor did they fall as steeply. In fact, during this latest economic episode, house prices didn't decline on a year-over-year basis until the first quarter of 2009, and the decline was small (0.2 percent). This was the first drop in house prices in nine years. "Although West Virginia permitting activity expanded and home sales grew in the beginning of the decade," said Sonya Waddell, associate regional economist and one of several report authors, "most areas of West Virginia did not see the sharp expansion in demand for housing as other areas of the country; subsequently, the housing contraction has been less severe."

However, there has been considerable variation in house price movement within the state. The Winchester and Hagerstown-Martinsburg MSAs saw the steepest growth and, subsequently, the sharpest declines in house prices. "Housing conditions in the parts of West Virginia that are most closely linked with the District of Columbia, Maryland, and northern Virginia have softened along with those major metropolitan areas," noted Waddell.

As for the composition of mortgages in West Virginia, the overall distribution of mortgage types is similar to that in the United States. The state also closely tracks the nation in terms of mortgage performance. While subprime loans make up a relatively small fraction of outstanding mortgages, they account for a much larger share of the loans in foreclosure. In West Virginia, subprime mortgages accounted for almost 34 percent of all foreclosures. (Subprime mortgage loans are those made to people with credit scores of 620 or below.)

The full report provides information on the composition and performance of prime and subprime mortgage loans at the MSA level and for selected counties in West Virginia. For more information, visit the Richmond Fed's online Foreclosure Resource Center. 

The Richmond Fed serves the Fifth Federal Reserve District, which includes the District of Columbia, Maryland, North Carolina, South Carolina, Virginia and most of West Virginia. As part of the nation's central bank, we're one of 12 regional Reserve Banks that work together with the Federal Reserve's Board of Governors to strengthen the economy and our communities. We manage the nation's money supply to keep inflation low and help the economy grow. We also supervise and regulate financial institutions to help safeguard our nation's financial system and protect the integrity and efficiency of our payments system.


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