Rising real estate prices in Utah are pulling thousands of seriously underwater home mortgages back to the surface, but the number of troubled loans is still high by historical standards. That may help explain why Utah is again among the Top 10 states in its rates of foreclosure filings.
Utah’s rate of foreclosure filings was eighth in the nation at 1 in every 697 housing units in August, compared to No. 1 Nevada’s rate of 1 in every 359 units. In June, Utah was ranked 16th nationally with 1 of 194 housing units seeing a foreclosure filing. Utah had a rate of 1 in every 824 housing in July, the 10th highest in the nation.
Our northern Utah market areas are displaying robust growth in rising unit sales and average sales prices,” Steve Roney, CEO of Prudential Utah Real Estate, told RealtyTrac, the real estate data company that gathers the statistics. “However, Salt Lake and Weber counties are showing a significant increase in default filings by lenders, indicating an increased willingness to foreclose on properties in a rising market.”
Overall the U.S. foreclosure rate for August was down 44 percent from a year ago, and down 2 percent from July. Nationally, one in every 1,019 housing units had a foreclosure filing. There were exceptions, notably Nevada, which had a 226 percent increase over July.
At the beginning of September, 88,051 homeowners owed at least 25 percent more on their mortgages than their properties were worth, according to RealtyTrac. A year ago the number was 103,148.
The latest number of deeply submerged loans is 16 percent of all mortgaged homes in the state, down from 23 percent in September 2012, the market research firm said.
Real estate experts say rising property values are behind the improvement. In Salt Lake County, the median price of a home sold in the second quarter soared 17 percent from the same quarter of 2012. Other Wasatch Front counties tracked by the board saw second-quarter prices increases ranging from 7.6 percent in Davis County to 14 percent in Tooele County.
Even so, the number of underwater loans is too high and is acting as a drag on the economy, said Jim Wood, director of the University of Utah’s Bureau of Business and Economic Research. Homeowners can’t sell their homes unless they are willing to shoulder a loss. That means they can’t move up. It could also prevent them from taking a better job somewhere else. And it’s harder for buyers to find suitable homes because the inventory of houses for sale is lower than it should be.
“It hurts demand for housing. It just cuts into the demand for houses. These people are locked in until [their loans] become positive. It really hurts mobility,” Wood said.
The reason so many mortgages are upside down is the recession. People who bought houses in the years running up to the start of the recession in December 2007 bought at the top of the market. Many buyers got into homes with little or no down payment. Then, beginning in the second quarter of 2008, prices began to fall. They didn’t stop falling until the start of the second quarter of 2012. Those four long years generated tens of thousands of underwater loans.
Credit: Salt Lake Tribune