If
you are thinking about capitalizing on recent foreclosure activity,
then timing may be the key to your success. Foreclosure activity in
Utah is up 96%
from a year ago and we are currently ranked 6th in the nation in per
capita foreclosure activity. So how does timing play into buying a
foreclosure? For bank owned homes (REOs), it is all about speed. On
the other hand, short sales are all about patience.
First, lets talk about REOs. When a bank gets ready to put a
home on the market, they typically get two opinions on the value of the
property from local real estate agents. They take those values,
reconcile them, and come up with a list price. The bank wants to be as
competitive as they can without giving the home away. Because it is
not an exact science, sometimes their values are high and sometimes
they are low. They key is being ready to buy when a home comes on the
market priced to sell.
The best way to do this, is to have your real estate agent set you up with an automatic email
to alert you anytime an REO comes on the market in your chosen
neighborhood. This way, you will can track prices and be ready to
write an offer when the right property comes on the market. Keep in
mind that banks want to sell their properties quickly and without
trouble. They are looking for buyers most likely to
make it to the closing table. You can enhance your offer by putting as
much cash down as possible, having a strong pre-approval letter ready,
and being ready to close quickly. With this strategy, you will be
among the savvy buyers picking up the best priced REOs.
With short sales, the strategy is a little different. Here, you have
to have the patience to work on the bank's time. Remember the bank has
not foreclosed on the property yet so they are not in a big hurry to
take a loss. They are going to review your offer with the buyer's
package when it is convenient for them. If you have the flexibility to
close when it is convenient for the bank, it will make your offer more
attractive. Approval from the bank can be as quick as a few weeks or
can take over a year. 3-6 months is not uncommon. You should ask your
agent some questions to get a sense of how long it is going to take.
For example, has the buyer submitted their hardship letter and package
yet or are they waiting for offers? Have any other offers been
submitted to the bank? And, has the bank approved the list price yet?
These
questions will help you narrow down properties that are priced right
and likely to close fairly quickly. Buying a foreclosed property can
be a challenge, but the savings can be huge. With the right timing,
you will be much closer to winning when buying a foreclosed house.
The $8,000 federal tax credit for first-time home buyers has been a boost to the local market. Salt Lake has seen the number of home sales this summer on par with last summer. Without first-time home buyers jumping in, we could have seen fewer sales and prices falling further than they have. The majority of my activity has been by people taking advantage of this credit.
So if you still have not taken advantage of this credit, you have until December 1st to close on the property. That means you would will want to have your home picked out by mid October so you can close mid November just in case you need a few extra days to tied things up.
If you are the gambling type, you could take your time and hope H.R. 2801 passes in time. The bill extends the credit for all homebuyers through 2010. Currently the bill is in committee and it may not make it out in time for congress to vote on it in September when it goes back in session.
The bill would be a definite boost to the home market but opposition points out a few obstacles to it being passed. First, Congress is too involved with healthcare to worry about another bill. Second, the original tax credit was meant to protect buyers from future depreciation and some argue that we have already hit bottom. If that is the case, there is no need for depreciation protection. And finally, there may not be the funds for the bill.
With this type of opposition, it looks unlikely that this bill will pass. If you are thinking about buying a home in the next year, you may not want to wait any longer.
The good news is sales activity is up. Unfortunately, the same is true for foreclosure activity. But prospective first time home buyers would be wise to act now and take advantage of an $8,500 tax credit and low interest rates now available to them. The number of REOs (Foreclosed bank owned homes) has continued to increase since June of 2007. In summer of 2007 we only had 39 REOs in Utah. The number has skyrocketed over the past two years, now approaching 800 REOs. What's worse, Utah is now #5 in the nation in per capita foreclosure activity.
When a property is foreclosed on in a neighborhood, it drags down the prices of all the homes in the area. And when home prices decrease, more foreclosures are likely as homeowners lose their equity cushion. So when will this foreclosure activity stop? It could be a year or two. Places like California have seen a slow down in foreclosures due to moratoriums but they expect another surge of foreclosures when the government hold on foreclosures is lifted. I expect Utah to trail California in foreclosures like it did in home prices leading up to the boom. Until we see foreclosure activity decreasing in California, we should not expect the same in Utah. With all this bad news, first-time home buyers may be reluctant to purchase. In actuality, this is a very opportunistic time to buy your first house. The majority of buyers are at the $200,000 and lower price range. This price range is the least susceptible to further price drops. Also, interest rates are very low right now and experts do not expect them to go much lower. Finally, the $8,500 tax credit expires Dec 1, 2009. With all these factors in mind, there is no reason for the first-time home buyer to wait.
Home inventory levels are figured out by taking the number of homes on the market in a given zip code and dividing it by the number of homes sold in that zip code for the last 30 days.The answer will give you the absorption rate.Or the number of months it would take to sell the existing inventory at the current rate if no other homes came on the market. A number higher than 8 indicates prices will likely fall. 6-8 prices should stay the same. And 6 and below points to a likelyhood of price appreciation.
Note: I do not include properties under contract in the calculation.And I round up for .5 and above.
Sellers Market1-6 Months
Normal Market 6-8 Months
Buyer’s Market8+ Months
City
Zip
July, 2007
November, 2007
July, 2008
November, 2008
March, 2009
Draper
84020
10
20.2
14
22
10
Midvale
84047
3
9
8
12
15
Riverton
84065
8
21
12
13
17
Sandy
84070
4
19
9
13
10
West Jordan
84088
8
9
9
14
10
Sandy
84092
7
14
13
15
12
Sandy
84093
15
8
18
11
19
Sandy
84094
3
7
7
13
10
South Jordan
84095
9
19
16
22
11
Salt Lake City
84101
11
16
36
25
34
Salt Lake City
84102
4
10
10
21
11
Salt Lake City/Aves
84103
7
12
16
22
17
Salt Lake City
84104
3
4
8
7
26
Salt Lake City
84105
6
9
8
8
10
Salt Lake City
84106
8
8
9
11
16
Murray
84107
4
7
9
13
10
Salt Lake City
84108
6
13
9
12
11
Salt Lake City
84109
6
21
19
13
12
Salt Lake City
84111
7
7
9
8
7
South Salt Lake
84115
4
5
12
10
15
Salt Lake City
84116
2
5
8
12
25
Holladay
84117
5
9
23
16
10
Taylorsville/Kearns
84118
3
8
8
12
12
West Valley City
84120
3
10
10
10
16
Cottonwood
84121
13
16
10
19
15
Taylorsville/Murray
84123
3
5
6
11
18
Holladay
84124
6
21
9
25
20
It looks like inventory levels continue to edge upward albeit at a slower pace than before.One bright spot is Draper which had a terrific March.60 Homes closed in Draper for March and 10 of those are short sales.That is great news because it means that buyers are stepping up and taking advantage of the deals out there.It also shows that short sales are closing. 17% of those home sales in Drapervwere short sales.Short Sales help the homeowner avoid foreclosure and they keep the market from getting glutted with inventory.However, they do take their toll on home prices.Currently, 23% of the homes on the market in Draper are short sales.
The downtown Salt Lake condo market still appears to be in a glut with a 34 month supply of homes and condos in zip 84101.Only three units sold in 84101 and one of those was a short sale in American Towers.Bring your best haggling and bargain hunting skills if you are shopping in this zip code.
1) Good Neighbor Next Door This program is for law enforcement officers, teachers, firefighters and paramedics. You can get up to 50% off the bidding price for the home but it is going to take some homework and some luck. The home must be a HUD home and it must be in one of the revitalization areas. You can go to this website to view the HUD homes available for bid and then go to the HUD website to see if it is in one of the revitalization areas. Contact me for more information on this program.
2) FHA The classic that is as popular as ever. Basically, it is a government insured loan that offers a low down payment and an excellent interest rate. It will require a good job history, a decent FICO score, and manageable debt-to-income ratios. Right now, you can get a FHA loan for only 3% down in most cases. Most conventional loans are requiring 10% down so you can see why FHA is so attractive. At least 50% of the loans I am seeing these days are FHA loans.
3) $8,000 Tax Credit Part of the new massive stimulus plan. Minimum qualifications for this program: 1) You must be a first time home buyer 2) Income needs to be less than $75,000 for the individual and $150,000 for married couples, and 3) You have to purchase between Jan 1st 09' and Nov 30th 09'. There are other qualification as well so check with your tax advisor. The tax form can be downloaded here.
The great thing about this tax credit is it's refundable. So if you were normally expecting a $1000 refund and were eligible for this tax credit, you would get a $9000 refund! This refund, low home prices, and low interest rates make 2009 a great opportunity for first time homebuyers.
4) $6,000 Down Payment Assistance for New Homes This is a Utah only program. Minimum qualifications for this program: 1) You do not need to be a first time homebuyer 2) Income needs to be less than $75,000 for the individual and $150,000 for married couples, and 3) Only applies to 30 yr fixed loans. There is $10 million available for this program and it is on a first-come-first-serve basis. Roughly 1600 homebuyers will benefit from this program.
5) Obama's Loan Modification Program. If you are having difficulty making mortgage payments and can prove that you are experiencing hardship, then you may qualify for this program. This program offers incentives to lenders to modify the loans so borrowers only need to pay 31% of their monthly income. The details of this plan are still being hashed out. There have been reports of scammers in the loan modification business so make sure you talk with a HUD approved loan modification counselor. This is the first step to determining if you qualify for this program.
According to RealtyTrac, foreclosure activity in Utah is up 10% from last month and up 104% for the year.The biggest jump from October was seen in the number of properties going to the auction [Notice of Trustee Sale(NTS)].In October there were 277 NTS and in November there were 624 NTS.These numbers were likely a result of July’s spike in Notice of Defaults (NOD).In July, we had 892 NOD filings when we had traditionally been in the 100-200 range.
I imagine the following scenario may be at playing out in these numbers:Mr. Seller needs to sell.He puts the home on the market in the spring of 08’.But the Salt Lake market has slowed considerably by this time and he can no longer sell at the price he needs to in order to break even. So Now,Mr. Seller cannot sell the home and can no longer make payments.He stops making payments in March/April of 08’.Notice of Default is filed in July of 08' along with 891 other NODs.In November, he gets a Notice of Trustee sale with the time and date the lender is going to hold the auction at the court house steps.Next January or February, the home will be sold at the auction.And in Feb or March of 09’ it will come on the Salt Lake Real Estate market as a REO (Bank Owned Home).
If you want to have these REOs emailed to you the day they come on the market then fill out this form and I will set you up with the automatic email for free.Be sure to fill out the price range and neighborhoods you are interested in.
Home inventory levels are figured out by taking the number of homes on the market in a given zip code and dividing it by the number of homes sold in that zip code for the last 30 days.The answer will give you the absorption rate.Or the number of months it would take to sell the existing inventory at the current rate if no other homes came on the market.
Note: I do not include properties under contract in the calculation.And I round up for .5 and above.
Sellers Market1-6 Months
Normal Market6-8 Months
Buyer’s Market8+ Months
City
Zip
July, 2007
November, 2007
July, 2008
November, 2008
Draper
84020
10
20.2
14
22
Midvale
84047
3
9
8
12
Riverton
84065
8
21
12
13
Sandy
84070
4
19
9
13
West Jordan
84088
8
9
9
14
Sandy
84092
7
14
13
15
Sandy
84093
15
8
18
11
Sandy
84094
3
7
7
13
South Jordan
84095
9
19
16
22
Salt Lake City
84101
11
16
36
25*
Salt Lake City
84102
4
10
10
21
Salt Lake City/Aves
84103
7
12
16
22
Salt Lake City
84104
3
4
8
7
Salt Lake City
84105
6
9
8
8
Salt Lake City
84106
8
8
9
11
Murray
84107
4
7
9
13
Salt Lake City
84108
6
13
9
12
Salt Lake City
84109
6
21
19
13
Salt Lake City
84111
7
7
9
8
South Salt Lake
84115
4
5
12
10
Salt Lake City
84116
2
5
8
12
Holladay
84117
5
9
23
16
Taylorsville/Kearns
84118
3
8
8
12
West Valley City
84120
3
10
10
10
Cottonwood
84121
13
16
10
19
Taylorsville/Murray
84123
3
5
6
11
Holladay
84124
6
21
9
25
Average
6
12
12
14
From November 2007 to November 2008 home inventory levels remained relatively flat in Salt Lake County.November 2008 saw a average of a 14 month supply of homes while November 2007 saw a 12 month supply.This is actually good news for the market.It means that inventory levels are high but are not getting out of hand.It also means that homes are continuing to sell in Salt Lake County despite the nation’s worst housing market in decades.
*One zip code of concern is 84101.There has not been one home sale in this zip code in the last 30 days and only 1 in the last 60 days.This zip has 112 properties on the market.Most of them are downtown Salt Lake City condos in the $250,000 + price range.It is clear that buyers for these types are units are not making any moves right now.Hopefully the church is taking this into account when planning price ranges for its condos at the City Creek Development.
Unfortunately,
Realty Trac reports that the Notice of Defaults for Utah returned to
their July high with 889 filings, 3 filings shy of July's 892 filings.
Given the lending environment, trends in other states, and this
increase in NODs, it is looking like the Salt Lake market could be at
least 9-12 months from prices bottoming out. As a seller, pricing
right in order to avoid chasing the market is key. As a buyer, take
your time and get signed up for automatic emails so you can track the
market. By filling out this form , you can get customized automatic
emails of the type of home you want. Some of the most popular searches
are REOs and Short Sales . This means the system will autmatically send
you all the REOs and Short Sales in your price and and in the
neighborhood you would like. This easy way to track the market will
have you on top of the best deals when the come on the market.
Notice
of defaults continued their upward trend after a August lull with 574
default filings for the month of September. Although this is a relatively high number, it is still less than July's
dramatic jump to 892 filings. We can expect a portion of these
loans to end up as foreclosures on the Salt Lake Market. Given the
foreclosure time line, it is likely we will see a surge in foreclosures
in Spring 2009
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
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