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
The current market offers a smorgasbord of deals for the
buyer with money to put down, good credit, and patience. For first time homebuyers or those struggling
with down payment and credit issues, your best bet is still going to be going FHA with a normal seller situation. But for those with something to bring to the
table, there is plenty to choose from.
Below is a sampling of the types of deals available and the benefits and
risks of each.
REO
REO stands for Real Estate Owned property and it is property
that is owned by the bank. REOs are
properties that have already been through the foreclosure process, to the
auction, and are now offered back on the market. Banks will hire REO specific real estate
agents to help them sell these properties.
Pros
Often can get a good price below market value. Banks want to close quick on
these properties to get them off their books.
Cons
The homes can be trashed and banks want you to sign an "as is"
addendum so you get no warranties.
Short Sale
Short Sales are properties where the seller owes more than
the property is worth. Instead of
bringing money to the closing table in order to get out from under the property, the seller may be able to sell the
home "short" or for less than it is worth.
This is where the buyer comes in and picks the home up at a discount
often at 70%-80% of market value. The key here is getting the bank to agree.
Pros
Below market value.
Cons
These things can take forever. The bank is not excited about taking a loss
and is in no hurry to accept offers and close.
That is why it is imperative that the agents on both sides of the
transaction prepare the paperwork as meticoulously as possible to encourage the
mitigation companies at the banks to accept the offers and close.
The Auction
You buy at the auction when a trustee fulfills his legal
duty as part of the foreclosure process and offers the property for sale at a
public auction to the highest bidder.
This can be a quick way to get a great deal. But I would not do it alone the first time. I recommend Vestus.com for help with this.
Pros
Quick way to get a good deal on the property. Also a clean way to get title since all
junior lien holders lose all interest to the property when it is sold at the
auction
Cons
There is high risk here because you don't get time to do
your due diligence. Make sure you know
what you are buying before you go to the auction and start making bids
Pre-Foreclosure
In a pre-foreclosure deal, you negotiate directly with the
seller to purchase the property from them before the property is foreclosed on
them at the auction. The seller will
need enough equity in the home to make this kind of deal work.
Pros
The seller gets out from a home they can not afford. Able to inspect property prior to purchase. Flexibility on terms.
Cons
Can take a lot of legwork on the investors/buyers side to
find the right buyer. People who are
having problems making payments are constantly contacted by buyers looking for
a pre-foreclosure deal.
If you need help getting started, contact me and point you in the right direction. Or if you are ready to go and want lists of short sale and/or REO properties fill out this form and indicate they type of property you are looking for. Thanks for
reading!
After
turning on the T.V. this week I felt like grabbing all my money and
heading for the hills. But when the dusts settles a little bit and the
panic recedes, there is going to be a ton of opportunity. And a
perfect example is REOs or Bank Owned Homes. As you can see in an article recent article on defaults in Utah, bank owned homes are expected to rise soon here in Utah. So here are 5 tips to help you make the best of the market.
1) Know Your Seller
Banks
tend to become habitual in the way they sell homes. With a savvy agent
you can research the seller and see some trends. Does this seller
always do 30 day price reductions? If the answer is yes, then maybe
you want to wait a few more days until the next price reduction before
you put in an offer.
2) Sell Your Home
Banks
are not going to want to wait around while you sell your home. They
are losing money every day they have the home on their books because of
costs associated with "carrying" the home or carry costs. These costs
can be quite high and they include things like maintaining the
property, paying attorneys, and paying interest on money owed. The
main reason they will let the property go at a discount is so they can
avoid these fees. This purpose is defeated if they have to wait around
for you to sell your home.
3) Get To Know a Contractor
It
is highly likely that your home is going to need some work. The bank
likely did some minimal repairs to put the home on the market but it
may take more to make it livable. Remember that this home was
foreclosed on and the last people to live there were probably not too
happy on their way out. Anticipate doing at least some minor repairs
like new carpet and paint
3) Don't Forget to Negotiate
Just
because they are a bank owned home does not mean that the banks will
not negotiate. They are a seller just like any other. And sometimes
they are more motivated than most sellers. In fact, many markets in
the U.S. are currently "REO Driven" where REOS are the ones selling and
are the price setters. So don't hesitate to throw in a low ball
offer. Just don't make it so low that you end up wasting everyone's
time.
4) Make it a Clean Offer
The
cleaner the offer the better. You can still do an inspection and have
the property contingent on financing, but be careful to add too many
contingencies. Also, offer at least 1% of the purchase price for
earnest money and be flexible on settlement dates.
5) Get Set Up With a Just Listed Auto Email
Since many of these properties are going to sell quick, you want to be the first to know about them. Click here and
indicate that you are looking for foreclosures and the area you are
interested in. then you will get homes emailed to you the day they
come on the market.
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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