Now that we've had a chance to explore how we've gotten to the state of the market we're in, let's turn an exploratory eye to what has actually happened since the beginning of this "Crisis of Credit". This post will explore the Utah County Real Estate market from 2007, just prior to the collapse, through our current position with regard to foreclosures and the impact they have on the overall market condition - PART 1 of 3.
Stretch your arms & legs, grab some popcorn and get ready for an intense several minutes of fingernail biting and heart-pounding statistical analysis. Just like with your favorite horror movies, keep in mind that what you're about to experience may upset you temporarily, but in the end you will be safe and your life will continue as normal. Just as with those horror-movies, the "foreclosure monster" is a scary beast that with a little education and some smart strategies will remain a figment of another reality, never to find you as you slumber peacefully through the dark hours of this financial storm. You will be okay - now, let's begin!
In 2007, Utah County sold 5,767 single family homes and condos. Not too bad. In 2007, the percentage of sold homes that were Foreclosures was a whopping 1.7 percent of the overall market. That means that in 2007, just prior to the collapse of the housing market on a national level, Utah County had a whopping 98 homes that were sold at foreclosure. At that point in time, Utah was 22nd in the nation for home foreclosures, only behind more rural states. This primarily was due to the fact that Utah has never been a real estate driven economy. Our unemployment rate in the state in 2007 was less than 5% and our new home development was keeping pace with our population growth.
Interestingly, 2007 saw a great surge in investment capital from other areas of the country where the real estate market bubble burst more dramatically. Out-of-state investors from California, Virginia, Florida and Nevada started to buy up real estate in Utah as their local economies went down the toilet. We began to see a surge in the building of speculation homes throughout Utah County and new developments like Traverse Mountain in Lehi were developed with outside income as well as the colossal failure of Orem's twin monolith condo fiasco - Midtown Village.
For the first time in the history of Utah County real estate, we were developing new construction at a non-sustainable rate. Perhaps fortunately, the first wave of foreclosures in Utah were primarily these same outside investors. I say perhaps because foreclosures in any aspect aren't great, but I would personally prefer to see a real estate investor lose a little money than to witness a family lose their home and the roof over their heads. Now, unfortunately, this first wave of foreclosures began to really hit us in 2008. Although the primary losses were incurred by investors this set the stage for the broadly depressed market in which we now find ourselves.
All of a sudden, home owners trying to sell their property were having to compete with short-sales and bank owned properties in their neighborhoods that were being sold for pennies on the dollar. The lending institutions were quick to foreclose in order to resale the assets and write the losses off of their books. Homeowners were beginning to get a quick education in the painful reality of the need to short-sale their property. Banks were becoming inundated by the sheer volume of defaults and short-sales flooding their establishments and were increasingly bogged down in the quagmire of foreclosure actions. All of this was occurring without the banks having a system in place to handle this swell in demand for a complicated and bureaucratic process for which they had neither the infrastructure nor the desire to service.
Still, at the end of 2007 we were not in too bad of shape. But then 2008 began. The market began to plummet. Foreclosures went on the rise. Short sales increased. Home sales decreased. Things began to get bad.
In 2008 we saw a 52% increase in foreclosures over 2007. Between January of 2008 and February of 2008 Utah jumped from 22nd in foreclosures to 15th in the nation. Salt Lake still led that trend and continues to do so. Still, with that increase our overall market in 2008 for foreclosure sales as compared to the rest of the market only consisted of 5% of the overall home sales in the state, with the majority coming in the last quarter of 2008.
Even still, we were not the worst to suffer. Check out this video and stay tuned for Part 2.
Written By:
Brian C. Andersen
Realtor, Property Manager - Bill Brown Realty, Inc.
www.UtahHomes4me.com
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