"American Nightmare"

By: Amy Bingham Email
By: Amy Bingham Email

The collapse of risky loans has set the housing market on its ear in some parts of the country.

The ripple effect can even be felt here in South-Central Kentucky.

National headlines have been alarming for months, but should we believe the hype?

Experts we talked to say no.

Mark Vaughn is a mortgage lender at Citizens First Bank and it's his job to keep a close eye on the loan industry.

"Guidelines are changing daily. Programs available yesterday will not be available tomorrow," Vaughn explained.

The reason the rest of us have stricter loan guidelines to follow is because risky loans, known as "sub-prime," have forced some homeowners to foreclose

These loans with loose guidelines were not just for low-income people.

As Dennis Wilson, a WKU Economy professor, points out, sub-prime allowed people of all economic backgrounds to get homes they normally wouldn't have.

"What we're talking about is risky loans--not just credit worthiness, but in terms of size," Wilson stated.

Now that interest rates and payments have gone up, many have been forced to foreclose.

The biggest problem is concentrated in seven states--Michigan, Ohio, Indiana, California, Florida, Arizona and Nevada.

"Over the last eight years you've seen real estate prices go through the roof. So to get people qualified to get in those houses, they had to force them into these huge mortgages," Wilson explained.

Realtor Jennifer Misener says Bowling Green is holding steady.

In fact, she says housing prices are up slightly from last year.

Still, she admits buyers are aware of the turmoil.

"We do find that buyers are a little more apprehensive now due to the national media attributing this to a sub-prime market, but honestly our market is still very good," Misener assured.

Curt and Courtney Clark just sold their home after having it on the market for seven months.

The average length of time in Bowling Green is about four months.

Rather than buy immediately, they are taking the non-traditional approach of renting.

Not only will the Clark's have more of a down-payment for their next home, but they'll also have more flexibility to shop for the home they really want.

And thanks to the collapse of sub-prime, they may also face some of the tightest loan regulations of our time.

But economists caution against overweighting the importance of the housing sector on the overall economy..

"I would argue this is more of a correction than a catastrophe," Wilson said.

"American Nightmare" is not exactly the description for the housing market in Bowling Green.





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