According to the Pew Charitable Trust, 1 in 25 Utah homes are predicted to be in some stage of foreclosure during the next two years. Nearly 25% of all home loans given during Utah’s housing boom in 2005 and 2006 were given to subprime borrowers. Nationally, about 1 out of 10 subprime loans have experienced atleast the initial stages of foreclosure.
If these stats hold accurate it could have a severely negative impact on the Utah housing market and the economy. Utah’s previous high foreclosure rate was 2% in 2002. This would be double that amount.
On the positive, if Utah does receive a huge flux in the rate of foreclosures, housing prices will likely decline as inventory of available homes for sale will rise. This is also positive news for real estate investors looking for deals and ways to take advantage of distressed homeowners who may actually have equity.
Increased foreclosures further justify the recent changes the lending industry has made in required down payments and required documentation and credit status for getting mortgage loans. As many properties that are in distress are upside down with the recent decline in housing values along much of the Wasatch Front, banks will need to allow more short sales and loan modifications to reduce foreclosures.
This prediction also could prove to be completely inaccurate, and number of foreclosures will only slightly increase in Utah. All in all, this just the news of possible foreclosures in Utah gives a decrease in buyer confidence for the average potential home buyer. Buyers on the edge will not make the plunge if they believe that the value of the new property they will purchase will decline. It’s a buyers market in most of Utah, and when the interest rate is good real estate will still be a good long term investment.
April 19, 2008 at 8:55 pm
You hit the nail on the head… I am in the market to buy a house but with this news I won’t be buying one for AT LEAST a year. Why take a chance buying something that is going to just go down. On another note, It’s not quite a buyers market in Utah. Prices have still not come down enough to make it affordable for the first-time buyer. It’s time to wait out the market.
April 19, 2008 at 9:27 pm
You guys need to take a look at the market. True, the above stat is scary. In fact the Utah Association of Realtors with the WFRMLS indicate this week that of the 7000+ home that are currently for sale, 10% are in some stage of foreclosure. So already we are at 1 in 10 homes that are for sale are in foreclosure. HOWEVER, I will argue that there could not be a better time to buy a home than now. Especially for First Time Home Buyers. I have been in 7 multiple offer situations in the past 4 weeks when trying to purchase homes under $200,000. The cheap stuff is selling! And sellers ARE coming down in price. They are NOT listing lower, but send them a low offer and watch what happens. They feel the negative pressure of the media and accept it. In addition to all this, rates have never been so low and look at all the FREE down payment grants Utah is pouring into the market to prevent a recession. Anyway, you’ve written a great article and you do have to look at the market very closely.
Thanks, Clay
theredsign.wordpress.com
April 23, 2008 at 6:04 pm
I think this number looks worse than it actually is.. I’d like to know what this figure looked like 4, 10, 15, 20 years ago. 4% of home sin foreclosure is not good, but a lot of times the homes in foreclosure are located in clusters. Making it really bad in certain parts but , well, you get the idea.