Many in S.C. bearing heavier mortgage burdens

COLUMBIA -- Columbia homeowners are bearing heavier mortgage burdens than before, with a larger percentage risking more of their income to meet monthly payments, according to data released today.

The U.S. Census Bureau's American Community Survey shows that 29 percent of Columbia metro home owners were spending more than 30 percent of their income on house payments in 2006, up from 27 percent in 2005 and roughly 20 percent in 2000. The state as a whole showed a similar trend.

Teresa Arnold, AARP's South Carolina legislative director, said she was surprised more people had home payments that exceeded the 30 percent level experts consider financially risky.

"It means there are many more people today in danger of losing their homes than there were in 2000," she said. "It's kind of scary."

An even higher rate of homeowners in other states are being stretched, but homeowners elsewhere are sitting on more equity -- living in homes worth far more than their incomes. That gives them a greater cushion against falling home prices.

Nationally, mortgage holders typically lived in homes worth three times their incomes' value in 2006, while those in Columbia and the rest of the state typically live in homes worth a little more than twice their incomes' value, according to Census data.

Today's information from the U.S. Census Bureau's American Community Survey follows an Aug. 28 report showing median income for S.C. workers, when adjusted for inflation, had declined since 2000 when adjusted for inflation, and poverty rates had risen since 2005.

It also follows a report last week from the Mortgage Brokers Association showing record levels of new foreclosures in the state in the first half of 2007.

The housing market was peaking in South Carolina in 2006 when the Census Bureau conducted its survey. The market had been driven by historically low mortgage rates. At the same time, housing values were rising at peak rates in South Carolina and nationwide.

The combination led more borrowers to seek to buy or refinance homes and inspired businesses to find creative ways to lend money to people who previously would not have qualified for the industry's traditional prime-rate 30-year fixed-rate mortgage, said Don Schunk, an economist at Coastal Carolina University.

For example, many lenders offered mortgages that would carry a low fixed rate for two years, then convert to an adjustable rate that often increased monthly payments by hundreds of dollars.

That helped put more people into more expensive homes, but when rates rose, more of their income went toward house payments, Schunk said.

"Everybody wants something that's bigger and better," said David Krahn, president of the S.C. Mortgage Brokers Association and owner of First Rate Mortgage brokerage in Charleston.

The heating and cooling of housing markets is normal, Schunk he said, but the current downturn is worsened because record foreclosures hurt investors who bought bundles of high-risk loans.

"The downturn in the financial market has brought the credit problems to the forefront," Schunk said.