Valley homeowners among the most overleveraged

The Sun-Gazette

Personal finance web site says Valley homeowners have mortgage debt ratios higher than two-thirds of cities in America

TULARE COUNTY – Buying a home represents an important milestone for most consumers. But for those who dive in to the deep end of real estate without a financial safety net, the decision could lead to buyer’s remorse in the long run.

Personal financial web site WalletHub recently determined which cities are home to the most overleveraged mortgage debtors by comparing the median mortgage balances against the median income and median home value in more than 2,500 cities. The results were surprising as most Valley cities traditionally have some of the most affordable housing, which ranked high on the list for the most overleveraged homeowners in the nation.

Lemoore was highest on the list ranking in the 86th percentile, meaning only 14% fared worse, as the average homeowner was spending 428% of their income on their mortgage and had financed 80% of the value of the home. Kings County neighbor Hanford was only slightly better, in the 80th percentile, spending 399% of their income on their mortgage.

Tulare County homeowners fared better. Tulare was in the 76th percentile, Porterville in the 75th and Visalia in the 71st. Visalia homeowners spend an average of 384% of their income on their mortgage and finance about three quarters of the value of the home. The median mortgage debt in was just $136,200 in Porterville and $160,800 but Visalia was $180,800, higher than any other valley city besides Clovis.

The real winner was just beyond Tulare County’s southern border. Delano was the Valley city that had the least overleveraged mortgages spending 327% of their income on a home and only spending 61% of their income on their mortgage, good for the 33rd percentile. The median mortgage debt in Delano was only $114,000.

California was home to seven of the 20 most overleveraged cities for mortgage debt, including Bell Gardens, Santa Ana, Santa Maria, Watsonville, Escondido, Bay Point and Beverly Hills, Calif.

James B. Marian, an adjunct lecturer at University of Arizona with master’s in Real Estate Development, said the most common financial mistakes people make when buying or refinancing a home are over improving the home. He suggests consulting with a trusted realtor or appraiser before making any major improvements.

According to a recent study, household debt increased by $87 billion in the third quarter of 2020. If you have already overleveraged your mortgage, Marian suggests speaking with your lender about options.

“The pandemic has been a very positive thing for the housing market,” Marian said. “When values continue to increase, buyers get overconfident and are willing to take on more risk, which can mean more debt. Unfortunately, it will take a market correction to rid the marketplace of its overconfidence.”

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