This past winter was tough, to say the least, for anyone in the business of moving houses. Skiers may have loved all the fresh powder, but real estate professionals saw the season differently; in fact, one in every five realtors quit in Salt Lake County. “We had a really rough winter,” Utah Association of Realtors CEO Christopher Kyler says. “We’re tied to national trends, and widespread panic on the national level really can have a local affect.”
His Salt Lake County counterpart, Ryan Kirkham of the Salt Lake Board of Realtors, agrees. “Last year we were not seeing any optimism—I didn’t feel or see any confidence—no momentum or excitement about purchasing.” As credit markets ground to a halt, foreclosures soared. Buyers ran from deals and desperate sellers either held fire sales or simply walked away. In hardest hit markets like Las Vegas and Florida, prices sank by as much as a half.
But as spring turned to summer and summer now turns to fall, the picture begins getting a bit warmer, at least in Utah, if not in the once red-hot sunbelt. Once the snow melted, optimism slowly returned, and those Utah realtors who stuck through the bad times are hoping recent trends hold.
And the trends have all pointed up. “The bottom is here,” Todd Pixton, Re/Max Metro associate broker says with conviction. “I’ve seen the market get stronger. My sales are up in the last few months, prices are somewhat stabilized.” Other agents agree. “Utahns are looking to the fundamentals, like ‘Am I still employed?’ Our [6 percent] unemployment rate is spectacular compared to the national average. Utahns are feeling better about their jobs,” says Kyler.
And that is building steady traffic for the first time in a year. “Each month is better than the month before, Dennis Woolston of Realty Pro Network says. “Any realtor will tell you that.”
Consumer confidence is part of the reason. Another is government programs that went into place at both the state and national level. The federal government enacted an $8,000 tax credit for first-time homebuyers. In Utah, the legislature used $10 million of one-time federal stimulus dollars to create the Home Run program, providing $6,000 cash payments at closing for home buyers who would buy unsold new homes which were glutting the market and driving prices down. “The [Home Run] program was extremely helpful,” real estate veteran Mark Ulrich of Ulrich Realtors reports. “I’m hoping they come back with something else. It really motivated people.”
Home Run created a fast run for the grants. The $10 million was gone in a matter of months, but helped close more than 1,400 sales, removing many unsold new homes from the market. While some complained that the program was akin to welfare for speculative home builders, it did clear enough of the inventory that homebuilders started building again, putting construction trades to work and generating new economic activity. The program was so successful that Governor Herbert recently announced a second phase of the Home Run program, which will allow 2,000 additional Utahns to receive $4,000 toward the purchase of a newly constructed home.
Closing the “New” Deal
The days of “liar” loans, the no document, stated income, nothing down deals of the freewheeling early years of the 2000s came to a sudden end as banks like Lehman Brothers and Bear Stearns collapsed under the weight of all the bad loans they made.
Finding a loan like those that fueled the housing boom and inflated the real estate bubble is now impossible. Today, buyers need to bring cash to the closing table, and have a credit score well into the 700s. And most lenders are OK with that, including partners Mike Christian and Mike Cox of Nation’s Lending Group. “Lending in general has tightened up. [Lenders] have gotten rid of a lot of buyers who shouldn’t be in the market. Now we’re bringing in A-1 paper borrowers.” Cox agrees, adding, “Borrowers now are sick of doom and gloom, recession and depression. They’re excited about moving on and taking advantage of what’s available.”
But even the buyers with good credit and money to put down are running into major problems in the purchasing process. In the old days, those old days being just a year or two ago, lenders could call an appraiser they knew, suggest a price target an appraisal had to hit and get the valuation that sealed the deal. No more. As the housing bubble burst, New York’s Attorney General Andrew Cuomo sued to end the buddy system of appraising. Now most every lender has adopted the new New York rules, which say appraisers will be picked randomly. Now appraisers don’t have ties to the agents or lenders. More often than not they are complete strangers who might not even have knowledge of the neighborhood where they’re appraising.
While there are obvious benefits to the new appraisal rules, others argue that the rules have stirred up more trouble. “Its turning into a nightmare,” Ryan Kirkham laments. “The appraisals make it more difficult to get the loan. Mortgage companies now make it almost too difficult to get a loan.” A half dozen realtors questioned for this article all came to the same conclusion: that about 20 percent of their transactions are falling through because of lower-than-expected appraisals. “Out of every 10, maybe two or three die, and when you’re looking for a housing recovery, that’s too big,” Kyler says.
But lenders, who need fast accurate appraisals bristle at the new rules. “Brokers used to have long relationships with appraisers,” says Nation’s Lending’s Mike Christian. “Our appraisers now have to compete with fly-by-night appraisers, and an appraisal that used to cost $350 to $400 now costs $500 to $700.”
Where the Steals Are
This is the mother of all buyer’s markets right now. One realtor describes standing in a client’s driveway in a new subdivision and seeing eight other “For Sale” signs along the street, most of them in foreclosure or pre-foreclosure. When one house in a neighborhood sells at a discounted price, it brings down the value of every other similar house in the neighborhood. “Another bunch of foreclosed adjustable rate mortgages will be hitting the market and then I think that will be the last of that,” Todd Pixton hopes.
But in a rising market, banks holding non-performing housing assets are changing their tune. Not long ago they were dumping houses at a loss to get them off the books, but as bankers see home sales rising, they’re getting stingier with deals. “Lender are dragging their feet—they’re not giving them away,” realtor Dennis Woolston observes. “If they don’t like an offer they’ll just sit on it for two months or more without even giving you an answer, so the buyer gets discouraged and goes to someone who is willing to sell.”
In South Ogden, Keller Williams broker Wyndell Pasch specializes in foreclosures and short sales. He says although the amount of foreclosures is increasing, the amount of foreclosed homes on the market is not. “Banks can’t keep up with them, and they lose more money if they foreclose. The lenders put a moratorium on foreclosures because there’s such a huge supply still.”
As home buyers adjust to the new realities, one market segment is dead in the water while another thrives. Home buyers now are looking for anything under $300,000 and in some hot neighborhoods, like Sugar House, for example, the inventory is tight.
Meanwhile, $500,000 and up mini-mansions sit vacant and unwanted. These are the homes buyers snapped up two years ago with creative financing they never really could afford. There is now and will continue to be a glut of those homes. “The inventory is being whittled away,” Kyler says, adding, “Certain price ranges are overbuilt—like $500,000 and above. If you try to find something under $300,000—we have just a two or three month supply. But we have a year’s supply over $500,000.”
Pasch knows of a home in Ogden Valley that sold for $670,000 last year that’s listed at $398,000 today as a foreclosure and still isn’t selling. “It’s phenomenal,” Pasch says. “There’s so much opportunity right now that this is when people will make millions of dollars. It’s an amazing opportunity for longer-term investors.
Utah’s foreclosure rate this summer stood at 2.36 percent, a rising but not overly alarming number compared to the nation. The rate puts Utah squarely in the middle of the 50 states—neither the best nor the worst. And sales figures indicate that prices are slowly climbing back close to previous peaks. For the under $300,000 homes, sale prices are getting closer to their peaks, but again, prices are much lower for the $500,000 and up “McMansions.”
Stepping into the Crisis
Several new Utah businesses have started up to address the particular problems of the housing mess. Designer Home Tending of Utah is one such company; it finds responsible tenants to live in empty homes. The tenants pay rent to the Designer Home Tending, and has to move in with fine furniture and keep the house clean and well kept. “It really helps a homeowner who has a house sitting vacant and abandoned,” owner and founder Cathy Cardenas says. “A house sells 30 to 60 percent faster, and if you’re the homeowner at least you get your utilities paid.”
Realtor Erica Atwood of Equity Real Estate is a true believer who has used Designer Home Tending. “Most homes vacant are sitting there without any life to them,” she says. By moving someone in, the empty home is again furnished, making it easier for buyers to see how they would distribute their furniture through the space. It’s like getting a free management company that watches over the house while the seller is relocated in another state.
Designer Home Tending gets paid through rent from the home tender, while the home tender gets to live in a luxury house at a bargain price—although they have to move whenever “their” house sells.
After testing the home tending concept in Boise, Cardenas moved the company to Salt Lake City, but it now operates in 10 major Western cities. “When you walk into a vacant home, all it says is ‘desperate,’” Cardenas says. “When you walk into a house that’s tended, you can see yourself living there.”
Another company helping sellers through slow times is Simple Staging Solutions, owned and operated by Jill Arburn. Arburn charges a one time consulting fee to either realtors or homeowners for a two hour walk-through of the property. “I have a fresh eye,” she says. “There are often things glaring to me that they don’t see.” Arburn suggests moving furniture, removing items that make the rooms look small. She urges owners to remove all personal effects, like family pictures and religious objects—things that prevent lookers from picturing themselves in the home. “You want the model home look,” she says. “Staging is not decorating—its almost the opposite—taking the personal out of the home.”
On the more urgent front of rescuing homeowners from foreclosure, SaveUtahHomes.com works several angles to try to keep delinquent homeowners in their homes instead of on the street. “Homeowners who are behind on house payments are a target for unscrupulous investors and loan sharks that are attacking them from every angle,” owner Ryan Wright says. He started the company in 2002 and won a Best in State Award earlier this year.
Wright’s staff works with homeowners by trying to modify the lender’s loan terms, obtaining a new private loan to eliminate the debt that’s piling up from missed payments, sells the home to a private investor who then leases it back to the troubled owner or arranges a short sale which preserves the homeowner’s credit. The service is free. Wright’s income comes from commissions paid by lenders for saving them the expense of foreclosure. The last thing lenders need in this climate is more vacant homes to resell. SaveUtahHomes.com is one of several firms which have risen in recent years to answer the need.
Onward and Upward
Utah housing prices took various sized beatings depending on original cost and location. St. George was especially hard hit by deflation in home prices, leaving realtors there with a new selling point. “St. George is affordable again,” sales agents there can tout. The same can be said in Park City. Outside of the resort areas, and under the $500,000 price range, homes are slowly creeping up in price, in some places nearly reaching their 2007 and 2008 peaks. But there are still deals to be made. It’s not a boom year ahead, but its not going to be a bust either. The trend continues to be toward stabilization of the market, and the slow gain in confidence among the home buying public.
“It’ll be a good year coming for buyers,” one agent says. “People are spending money again.”