Fresno and Clovis home values have been somewhat level for about the last year, although Fresno home values did decrease slightly during that time.
This is interesting for bankruptcy professionals for a few reasons:
1. If home values are levelling off, people who are buying homes right now will not be below water in 5 years and are less likely to get into troublesome loans (and there aren’t many out there anyway).
2. In the last 2 years, we have seen a lot of completely unsecured second mortgages. If home values start going back up, some of those unsecured mortgages might be start being partially secured. If that is the case, debtors would not be able to discharge the second mortgages in Chapter 13 bankruptcy.
I like to look at median household income as a basis for figuring out what home values should be. Fresno median household income is $32,236. Clovis median household income is $42,283. Generally, you don’t want to see home values at an amount that would require payments higher than 31% of the borrowers gross income. This would put the monthly mortgage payment for a Fresno borrower at $832.76 per month and for Clovis, $1,092.31 per month. Assuming 6% interest and 30 year term, this would put the maximum median loan amount for Fresno borrowers at $138,897.94 and for Clovis borrowers it would be $182,188.29. Current Fresno home values are $139,700 and for Clovis it is $211,100. According to the income analysis, that means Fresno real estate should be nearing the bottom of its free-fall and Clovis may have a bit farther to fall. We’ll see if that is the way it plays out, because there are a lot of other factors that influence real estate values. It is just my opinion that income should be the main one.
