Editor’s note: This is the first in a five-part series examining the effect the financial crisis is having on the local economy.

With most of the blame for the beleaguered economy resting on the doorstep of declining home sales and foreclosed mortgages, the Howard County real estate market is holding its own.

While sales are down about 10 percent from 2007, the number of homes sold during this year’s third quarter showed an increase over the second quarter.

Local real estate agents say despite national media reports that credit is hard to come by, local banks have funds available to finance the purchase of a home.

“We’re down in numbers, but not as bad as you think,” said Kathy Harbaugh, director of the Realtors Association of Central Indiana. “It’s not bad for what is happening in the country.”

Harbaugh said 91 homes were sold in September as compared to 96 during the same month a year ago.

She said the areas in the country being hit hardest by foreclosures are those markets that saw a huge increase in home values. Harbaugh noted the San Diego and Miami Beach, Fla., areas saw a 200 percent to 600 percent increase, while Kokomo and Howard County realized 1 percent and 2 percent climbs.

Harbaugh said repossessed homes in Howard County are driving prices down locally.

“That is a part of the market,” she said.

“We have been under the 2007 numbers every month this year,” Harbaugh said. “This is a total buyer’s market”

Harbaugh said houses are still selling in the market. She also noted that mortgage interest rates remain low.

According to data compiled by RACI, the average selling price of a house is 5 percent below the asking price.

“The value of homes came down about 5 percent,” Harbaugh said of the local market.

Foreclosed homes are approximately 35 percent of the total sales figure, she said.

“That is the biggest factor in bringing the price down,” Harbaugh said. “The impact is across the board.”

Kevin Hardie, broker for The Hardie Group, agreed that home prices are down as compared to previous years. He attributes the decrease to the increased amount of foreclosed houses on the market.

He noted that home values showed steady increases in Howard County until 2005, but lost some value over the last three years.

“They are talking nationally about the bubble bursting,” he said of home values. “Our bubble never got to the same level as it did nationally.”

Repossessed houses, the number of which has been on the rise, are having a negative effect on home values in many neighborhoods, he said.

“We hope those numbers will drop,” he said. “People can restructure existing mortgages, adjust interest rates and stay in their homes.”

ReMax broker Penny Irwin echoed his concerns on repossessed homes, calling their impact “huge.” Of the 912 houses for sale, she said, 160 are repossessed.

Enter the $700 billion economic stabilization bill approved by Congress and the president two weeks ago which should help matters. The financial rescue plan authorizes the U.S. Treasury to buy or insure bank assets whose values have plunged in the country’s economic turmoil.

“The bailout will lower the number of foreclosures,” Irwin said. “It will allow people to refinance at the current appraised value and be able to hold onto their homes.”

Hardie said there is money available to purchase homes in Howard County and noted there is a $7,500 tax credit available for first-time buyers through next June.

“It is an excellent time to buy because interest rates and prices are down,” he said. “If the buyer has a good credit score, secure employment and money for a down payment, they can obtain a mortgage.”

Hardie said the days of buying with no cash down are gone and that the average amount needed for a down payment is 3 percent of the purchase price, with the exception of veterans, who can obtain a no-money-down mortgage through Veterans Affairs.

Irwin said their home sales are up over a year ago but the sale price is different. She said the average sale price in 2007 was about $93,000. Today, it’s $85,000.

“It’s a buyer’s market,” she said. “You can buy a $100,000 home for $90,000.”

Ken de la Bastide can be reached at (765) 454-8580 or via e-mail at ken.delabastide@kokomotribune.com