From Santaquin to Alpine, the Utah housing market is hot.
How hot?
Three years ago, a $250,000 residence was a premium home in Utah Valley. Now, the average sale price of a house in the area is $254,000, according to The Deseret News.
In fact, the number of valley homes sold for at least $500,000 jumped from 95 three years ago to 368 in 2006.
Real estate expert Kevin Call now tracks the valley’s high-end housing market by counting the million-dollar homes: 44 sold last year, 73 on the market right now.
The surge is jacking up home prices at the bottom end of the market, too; great news for homeowners - but bad news for would-be Utah mortgage applicants who now can’t afford most of the properties in the Valley, said Call, executive vice president for the Utah County Association of Realtors.
How bad is the housing affordability gap?
Only 3 percent of homes on the market right now are listing for less than $160,000. Moreover, 90 percent of all houses on the market this week list for $200,000 or more.
“That’s an affordability problem in our marketplace,” Call told the Provo Kiwanis Club on Tuesday. “If you are a schoolteacher in the Alpine School District with five years’ experience and a master’s degree, you can’t qualify for 90 percent of homes on the market unless you have a second job or a spouse that works.”
Don’t expect new construction to ease the problem, either.
“You can’t find a new construction home for under $160,000,” Call said. “Even downtown Eagle Mountain has passed that threshold.”
The reason is a stark leap in lot prices. For example, in 2004, a lot in the Val Vista subdivision in American Fork sold for $75,000. Last year, a nearby lot that was the same size sold for $149,500.
The affordability situation is compounded by a low inventory: Only a small supply of homes are for sale for less than $160,000 or even up to $200,000. Adding to the problem? Rising mortgage rates in the state.
“The group that can handle the least competition is facing the most competition,” Call said of lower-income home buyers.
The good news is that homeowners are seeing an excellent return on their investments.
Last year, half of all single-family homes in Utah Valley sold for more than $213,075 in 2006, and half sold for less. That median sale price was up 33 percent from $160,000 at the end of 2004.
The median price in Orem jumped from $151,525 to $180,000 over the same period. In Provo, it went from $143,450 to $170,000. The highest appreciation was in the Highland-Alpine area, where it grew roughly 23 percent last year alone.
“I expect 2007 to be approximately the same in unit sales as it was in 2006,” Call said. “I expect prices to increase, but certainly not at 22 to 24 percent. Our market is beginning to settle, to stabilize a bit. I believe that’s healthy for our market.”
We’re sure local mortgage brokers, with their increased business, would agree.
Posted by Jed Moss on Jan 31 2007 under Utah
Mortgage rates have been edging up for weeks, but Utah residents should not worry about rates escalating further this year, a well-known Utah economist told the Salt Lake Tribune Tuesday.
In fact, rates for 30-year Utah mortgages could ease a bit going into the prime home-buying season of spring and summer - perhaps even falling below 6 percent, said Jeff Thredgold, a Zions Bank consultant.
“Rates [for a 30-year Utah mortgage] could be back as low as the high-5 percent to low-6 percent range by summer,” he said.
Nationally, the average rate for 30-year fixed mortgage rates averaged 6.3 percent at the end of last week, up slightly from 6.2 percent the previous week, according to Freddie Mac. As recently as December, mortgage rates were about 6 percent.
In Utah, the average 30-year home loan rate appears to be slightly higher, with many lenders advertising rates around 6.5 percent.
Many in the Utah housing market are especially concerned with the home mortgage rates these days because of the marked increase in the price of houses over the past two years.
Higher prices have made it more difficult for low- to moderate-income families to buy a house, and put many in the position of risking default, leading to the recent spike in Utah foreclosures. Moderating those increases in home values, however, has been a slight decline in interest rates that began in September 2006.
But in recent weeks, rates on the popular 30-year mortgage have been moving higher, and higher mortgage interest rates mean higher monthly payments.
The monthly payment of principal and interest on a $300,000 home loan at 6 percent, for example, is just under $1,800. The monthly payment on the same amount at 7 percent would be nearly $2,000.
In some cases, families who are barely able to qualify for a home mortgage at 6 percent might not qualify for the same amount at 7 percent.
Jonathon and Tiffany Andrews of Clinton said they have been very concerned about mortgage rates in recent weeks as they have looked for a new house in Roy. And they were relieved to receive a rate lock weeks ago at around 6 percent for a 30-year mortgage.
“Had rates been a bit higher, we definitely would not have been able to afford the house we got,” Jonathon Andrews said.
Even among economists who expect rates to edge up by the end of the year, few are raising the possibility of home loan rates broaching 7 percent, which last occurred in 2002.
In his forecast for 2007, Doug Duncan, chief economist for the Mortgage Bankers Association, said there is a possibility that 30-year home mortgage loans nationally may rise to an average of 6.5 percent by the third quarter of this year. But even that rate is low by historical standards.
Foreclosures are rising across the nation… with some notable exceptions.
Defying national trends, home mortgage defaults are fast becoming a thing of of the past in the red-hot residential real estate market of Tooele County, Utah.
During the past year, foreclosures dropped by about 70 percent compared to 2005, according to the Tooele Transcript Bulletin.
“Twelve to 18 months ago we would see 10-16 foreclosures per month, but now we only get three to four per month,” said Vicki Griffith, owner and broker for Tooele’s Prudential Real Estate office.
“The value of houses has gone up so much and the market is so hot that people are able to sell quickly [before the bank files a delinquency notice],” she said.
During 2006 home prices in Tooele, Stansbury Park and Erda jumped by 18.6 percent to a median price of $160,000, according to MLS data. Home prices in Grantsville jumped 20.9 percent during the same time frame to a median price of $178,809. Countywide home prices increased 18.4 percent.
The increase helped those who were forced to sell quickly.
“Eighteen months ago there were a lot of no-down-payment mortgage loans,” Griffith said. “People would lose their jobs or get divorced and end up in foreclosure.”
Tooele County Board of Realtor’s President Michelle Warner said today that Utah mortgage demand is booming, while there are currently zero bank-owned or HUD-owned properties for sale.
“That may change tomorrow, but we’re doing so well and the values of homes have increased so much that we’re seeing few foreclosures,” she said.
Area broker Brad Sutton related a similar scenario, noting that both foreclosures and short-sales back to banks have dropped. Short-sales, however, have helped some homeowners avoid foreclosure in this portion of the Utah housing market, since banks are often willing to buy properties appreciating at double-digit rates year over year.
People are able to avoid Utah foreclosures by selling back to the bank at a loss, said Sutton. It’s okay with the bank in many cases, because the people involved already are 2-3 months behind in payments.
However, if there is private mortgage insurance on the home loan, banks will file a claim then sell the house to the insurance company so that the bank won’t suffer a financial loss.
“Almost always with a foreclosure there is a 2nd mortgage and the debt is greater than the value of the house - second mortgages are relatively easy to get, so the house is appraised too high and people get in trouble and end up owing more than the house is worth,” Sutton said.
Despite signs the Utah real estate market could cool off somewhat this year, Tooele County’s market may buck the trend. December was the best month ever for Prudential’s Tooele office with sales volume totaling $9 million. And during the past 40 days, 93 houses were sold in Tooele.
There were 1,215 houses sold in Tooele County during 2006. Utah County (21.7 percent) posted the biggest jump in values along the Wasatch Front followed by Salt Lake County at 21.3 percent and then Tooele County at 18.4 percent. Davis County housing increased 14.9 percent and Weber County jumped 11.5 percent.
Utah mortgage demand and home prices will soon fall, but not enough to make them affordable, according to presenters at the Washington County Economic Summit.
“I’m concerned, and I think you are, too,” said Vardell Curtis, CEO of the Washington County Board of Realtors, before a packed auditorium at the Dixie Center. “And if you’re not, you should be.”
According to the St. George Daily Spectrum, public employees cannot afford to buy homes in Washington County, where the average single-family unit now sells for almost $350,000. For service employees, Curtis said, “Paying rent is not any easier, unfortunately.”
A softening housing market will offer little reprieve.
Homes lingering on the market, with many more in development, have swelled inventories and should push prices down in early 2007, Curtis said, but not for long. Even with a few bumps in the road, the end of 2007 could look a lot like the beginning of 2006, “which was still a pretty good time in the real estate market.”
Curtis echoed the warnings of Robert Gray, of the Strategic Planning Group, who in a previous session cited the lack of affordable housing as throwing the local market into crisis. With workers unable to find housing, a labor dropoff could choke the booming economy in Southern Utah.
“Housing is critical to growth. Area home prices are greatly outpacing incomes. Guess what: That can’t continue,” Gray said.
The real estate boom edged many local buyers out of the market in the last several years, as average home prices were 3.6 times higher than family income in 2002. They were 7.3 times higher in 2006. Utah foreclosures are already rising.
Raising Washington County’s median income, $46,900, to the state median, $58,000, would eliminate 80 percent of the housing problem. Income-based solutions could also address down payments, mortgage rates and various transportation costs.
But in tackling home prices, governments could subsidize infrastructure and streamline the permits and requirements that raise development costs. Home Builders could focus on smaller units and higher density.
“Expecting housing to be affordable without changing the any of the factors that are actually affecting affordability - well, that’s insane,” said Gray.
Curtis told his audience to keep 2006 in perspective, despite the media’s “doom and gloom” about the severe dropoff in demand for housing and the mortgage loans needed to finance homes.
“At the end of the day, it was not a bad year,” he said.
Washington County continued to outpace the state in price appreciation, with St. George placing 9th among metropolitan areas nationwide.
“It’s still a good time for both buyers and sellers,” Curtis said.
Builders have taken notice, with permit applications slumping in 2006. But sellers should not expect the prices homes fetched in 2005, even though the opportunity to receive great rates on home loans is strong.
“To an economist, if you can’t sell it, the price is probably too high,” said economist Lecia Langston. “You’ve seen it, I’ve seen it, and the numbers are showing it. I’m here to tell you this probably isn’t over yet.”
Posted by Richard Barber on Jan 12 2007 under Utah
Across the nation, you can read about rising foreclosure rates within housing markets.
But not in Utah.
Buoyed by the state’s strong real estate market and high job growth, fewer residents are falling behind on their mortgages and losing their properties to foreclosure.
Utah is bucking a national trend of higher numbers of past-due loans, the Mortgage Bankers Association (MBA) reported in its National Delinquency Survey. Only 0.68% of mortgages in Utah were in foreclosure in the third quarter, down sharply from 1.06% in the same period in 2005 and 1.52% in 2004, the association said.
The drop is not going unnoticed.
“Over the past three months, we’ve seen a big decrease in people who say they are near foreclosure,” said Preston Cochrane, president of credit counseling company AAA Fair Credit Foundation in Salt Lake City.
Once among the highest in the country, Utah’s foreclosure rate is well below the national average of 1.05%, according to the MBA report, which covers government-insured and conventional loans. Foreclosures nationally were up eight basis points from the third quarter of 2005.
The state’s rate on delinquent Utah mortgages - which measures the total share of loans that are more than 30 days past due but not yet in foreclosure - was 3.71% in the third quarter, down from 4.12% in 2005 and 4.64% in 2004. Nationally, the share of delinquent loans rose to 4.67%, up from 4.44% last year.
Nationwide, interest rates are rising, which in many cases has increased the monthly payment for borrowers with adjustable-rate home loans. Some families struggle with higher payments, and mortgage refinancing at fixed rates offers no relief because rates are so much higher.
If those homeowners are in one of many markets nationwide right now in which homes are taking longer to sell and prices are flat or even falling, they may feel they can’t sell fast enough and for enough money to cover their mortgage obligations.
So they simply walk away.
“But if it’s easy to sell a home and home prices are going up, people in financial trouble can often avoid foreclosure,” said John Mitchell, U.S. Bank regional economist.
That, he says, is exactly what is happening in Utah, where home sales and appreciation over the past year have been strong.
Job growth is another factor, said Douglas Duncan, chief economist for the Mortgage Bankers Association.
States with high job growth and low unemployment often have low delinquency and foreclosure rates. And Utah, which is near the top in both those categories, is no exception. People in these states are more likely to find a job fast if they lose one and can continue to make their mortgage payments.
They also are more likely to see wage gains - either from their existing employer or by switching jobs.
Nationally, Utah had the 16th-lowest rate of delinquencies among all states in the third quarter, down from No. 21 in the third quarter 2005. Utah had the 17th-lowest rate of foreclosures in the past quarter, down from No. 20 in 2005.
Home shopping in Salt Lake City, Nancy Cygan is between two worlds.
Her house in the Chicago suburb of Roselle, listed at $369,900, has been shown only once since May, despite its moderate price and proximity to an airport and train stop. Then there’s Utah.
“I never thought, leaving Chicago, that I would not be able to afford something comparable in Salt Lake City,” Cygan said Wednesday as she scouted homes with her sister, a Utah real estate agent.
How drastic are the changes? Three years ago, the Utah housing market was the weakest in the nation.
Today, it is second only to Idaho.
Home prices in Utah rose 17.4 percent during the three-month period ending September 30 compared to a year ago, according to the Salt Lake Tribune, a jump boosting the state from 10th to second best nationwide. In addition, three Utah cities - St. George (9), Salt Lake City (10) and Provo-Orem (18) - made the top 20 list of metropolitan areas.
Nationally, year-over-year home prices rose at a much slower rate of 7.7 percent, reflecting a slowdown in markets that grew too fast. California mortgage demand, for example, has tumbled as prices declined in more than half its cities.
The numbers, which measure average house price changes in repeat sales or home equity loan refinancing of the same single-family properties, help housing economists estimate changes in the rate of mortgage defaults, housing affordability and other data pertaining to specific geographic areas.
When appreciation soars, as it has in Utah, those renting are the biggest losers, forced to pay more with none of the benefits of ownership. And homeowners, even those not looking to sell, benefit. That’s because as a home appreciates, so does the owner’s sense of wealth, which inspires additional confidence and spending.
In which case, Utahns were not feeling particularly confident during the early part of the decade, when the state missed out on the housing boom that occurred in states such as Arizona and Nevada. It was only a matter of time before Utah caught up, but going from dead last to No. 2 is amazing.
“People have been cashing out in places like San Diego and Phoenix and going to Boise, Salt Lake and Twin Falls where they can get twice the house for half as much money,” said Salt Lake City economist Jeff Thredgold. “But someone in Austin or Atlanta would be stunned at what they would have to pay to live in Salt Lake City.”
Utah mortgage costs remain low, and St. George, Salt Lake City and Provo-Orem all climbed the list of highest home appreciation. It’s making those who own now rich, and those looking to buy struggle.
“I was like, ‘Whoa, are you kidding me?’ There were these bungalows and they were cute, but they were teeny. We finally upped our price range,” said Jeremy Pugh, an arts editor at the Logan Herald who landed a job at Salt Lake Magazine and started scouting for a home in Sugar House.
They sold their home in Logan for $140,000 and paid $260,000 for a 1914 Victorian in Sugar House, meaning steeper bills and no more prepayments - at least for the foreseeable future.
“We now have twice the house payment for a smaller home,” Pugh said. “We bought high, basically, and we’re just hoping our value will continue to appreciate.”
Don’t count on it, says real estate agent Bob Plumb. The market already is softening, and while some of the slowdown is seasonal, sellers aren’t as brazen as they were six months ago.
“Sellers used to just add 5 to 10 percent onto the value and get it. Now pricing is a little more critical.”
Posted by Richard Barber on Dec 02 2006 under Utah
As cases of mortgage fraud rise across the nation, at least one state is considering taking serious action against the crime.
It could soon become a second-degree felony in Utah, prosecutable under the state’s anti-racketeering statutes to allow the seizure of assets so they can be returned to victims.
Utah Rep. Paul Ray, R-Clearfield, who authored a similar bill that died in March, said he’s out to do something about the state’s rate of mortgage fraud - the second highest in the nation in 2005 on a per capita basis, according to a report by the Mortgage Asset Research Institute.
According to MARI, Utah has been among the top five states in per capita home mortgage fraud since 2001, despite having increased requirements for professional licensing and education and conducting more rigorous enforcement.
Ray said amendments to his previous mortgage fraud bill, HB 159, made it too broad and “bloated it down with fiscal costs” for the state. The latest version of the bill is more limited in scope, criminalizing mortgage fraud and creating a special prosecutor and two investigators at an annual cost of $275,000 a year.
He pointed to a unique feature of the bill is that it would make the state’s anti-racketeering statutes applicable to mortgage fraud, allowing authorities to seize fraudulently obtained property and restore it to victims.
The anti-racketeering statutes “just seemed to fit” the crime of mortgage fraud, Ray said, because “most of these guys are not just doing it one time, it’s a pattern” involving multiple properties.
Making mortgage loan fraud a felony would be the first step in addressing the problem, Ray said. Utah is one of 10 nondisclosure states in the U.S. - meaning information on real estate sales is not available to the public - “and that actually breeds a lot of the scams,” Ray said.
Three of 10 states listed by the Mortgage Asset Research Institute as having the highest rates of mortgage fraud - Utah, Texas and Missouri - are nondisclosure states.
Down the road, although not this term, Ray said he will consider introducing legislation that would make Utah a full-disclosure state.
Looking for a second home on a ski mountain? Considering a mortgage loan on a residence out west?
It used to be a given that these shoppers would head straight to the Colorado housing market, specifically Aspen. This isn’t the case anymore.
With its dramatic rock outcroppings, destination ski areas and still affordable land values, Utah is fast becoming the go-to state for luxury accomodations and resort developments.
The word regarding luxury homes in the area isn’t a major secret, said Stan Castleton, developer of the St. Regis Resort and Residences at Deer Crest in Park City, told the Associated Press and Mountain News.
Castleton’s project, and others at the former Elk Meadows ski area and vivid red rock canyons of Big Water, are attracting attention for their plush style, million dollar pricetags and remote locations. If approved by county officials studying the project, the Elk Meadows ski resort alone will increase one southern Utah county’s assessed property values by 20 percent.
Castleton’s Deer Crest development includes 26 private condominiums and 67 condo suites. Slated for completion in 2008, it will set the standard for high-end accomodations, with guests treated to butler service, spas, and - of course - ski-in, ski-out access.
The pricetag for all that luxury and accessibility? One and a half million to $4.3 million for the condo suites and $2.5 million to $8 million for the residences.
It’s not exactly affordable housing - but it’s not such a bad deal in this demographic, either. Statistics show that Park City is outpacing Western resort towns in the number of property units sold and exceeded the volume sold in dollars, but has remained sixth in average sales price, according to numbers from The Rocky Mountain Resort Alliance.
In the first quarter of 2006, Park City had 743 units sold, higher than the 100 in Aspen, Colo., the 180 in Sun Valley, Idaho, and the 674 in Summit County, Colo., home to Breckenridge, Copper Mountain, Arapahoe Basin and Keystone resorts.
But the average sales price in that Utak marmet is $731,772 - lower than Telluride, Colo., Teton Village, Wyo., Vail, Colo., Sun Valley and Whistler, British Columbia.
A luxury home that would cost $1.7 million in Park City would cost $2.7 million in Aspen. That’s quite the difference for anyone seeking fixed or adjustable rate mortgages in the region.
In other words: it’s not just preceived value in the area; it’s actual value compared to similar towns out west.
