Experts: Utah expected to skirt the brunt of a recession
By Lesley Mitchell
The Salt Lake Tribune
Article Last Updated: 03/06/2008 11:38:38 PM MST
More Utahns are falling behind on their mortgages and losing their homes to foreclosure, but Utah's share of
problem loans is unlikely to reach the troublesome levels of many other states, a top economist said Thursday.
About 4.15 percent of mortgages in the state were at least 30 days past due in the fourth quarter of last year,
up from 4.01 percent in the same three months in 2006, the Mortgage Bankers Association reported Thursday in
its National Delinquency Survey. That's the 11th lowest rate nationally and well below the state's high of 5.3
percent in 2003. Nationally, the delinquency rate is 5.82 percent.
Utah's foreclosure rate - the percentage of loans in the foreclosure process - rose to 0.8 percent in the fourth
quarter, up from 0.61 percent in the same quarter in 2006. But it remains the sixth-lowest of all states and far
below the state's high of 1.7 percent in 2003. Nationally, foreclosures hit an all time-high of 2.04 percent.
"Utah is going to see higher delinquency and foreclosure rates like the rest of the country, said Gus Faucher,
economist with Moody's Economy.com. "But they aren't going to go up as much in the state as they are in the rest
of the U.S."
What's going on in the rest of country is bleak. Several negative national reports that came out Thursday,
including the one from the Mortgage Bankers Association, caused concern on Wall Street, where the Dow closed
down 214.60.
Another report, by the Federal Reserve, said that the equity Americans have in their homes has fallen to the
lowest levels since the agency began tracking the data in 1945. The National Association of Realtors said
pending U.S. home sales in January were at the second-lowest reading on record.
And Moody's Economy. com estimates that 8.8 million homeowners - about 10.3 percent of all homes - will have
zero or negative equity by the end of the month. Even more disturbing, about 13.8 million households - nearly 16
percent of all homes - will be ''upside down," meaning owners will owe more than they can sell their homes for, if
prices fall 20 percent from their peak.
Faucher, of Economy.com, said Utah's underlying economic fundamentals are better than many other parts of
the country. Though it has shifted into a lower gear, Utah still has good job growth and the state has had less
reliance on subprime lending - loans made to people with poor credit - and exotic mortgages, such as those that
keep monthly payments low but make it difficult for borrowers to pay down their loan balance. Some states, such
as California, have had high levels of these types of loans.
In Utah and other states, higher delinquencies and foreclosures stem from a slowdown in the state's real estate
markets, which make it more difficult for many financially distressed families to sell their homes quickly enough
and for enough money to satisfy their mortgage obligations.
While economists continue to debate whether the national economy is in a recession - a deep economic
downturn - many states, such as Michigan and California are mired in downturns deep enough for a growing
number of people to use the "R" word to describe it.
But not Utah, Faucher said.
"Utah should manage to skirt recession," he said.
However, there will be some pain in the real estate markets, he said.
Faucher believes median home prices in Utah peaked in the third quarter of 2007 at $206,000. Prices should
bottom out by the end of the year at $184,000, he said.
But Utah's 11 percent decline in prices is much less steep than Arizona's 24 percent and California, down 21
percent.
Prices will decline in Utah, Faucher said, because the state's run-up in home prices in recent years has made
homes less affordable and tighter lending standards has made it more difficult for many families to qualify for a
home loan.
But there is some help on the way. The Department of Housing and Urban Development on Thursday
announced it has raised the limits on new loans backed by its Federal Housing Administration.
That means home buyers in Salt Lake County, for example, can borrow up to $729,750 under the FHA
program, up from $362,790.
The new limits went into effect Thursday and remain in effect through the end of the year, HUD said.
The new limits will help more people qualify for homes, especially first-time home buyers and others who may
have less-than-perfect credit or minimum downpayments. It also helps more people refinance out of
adjustable-rate loans and other "exotic" loans that they wouldn't otherwise be able to get out of, said Tim Roush,
president of Veritas Funding, a mortgage company in Murray.
"This is going to be huge," he said. "There were a lot of people who have loans in the $500,000 and $600,000
range who need to refinance or who want to buy in that price range with small downpayments or credit
challenges."
Other good news: Thirty-year mortgage rates fell this week to an average 6.03 percent, mortgage company
Freddie Mac reported Thursday. That's down from the previous week's 6.24 percent, which had been the highest
level in more than three months.
lesley@sltrib.com
By Lesley Mitchell
The Salt Lake Tribune
Article Last Updated: 03/06/2008 11:38:38 PM MST
More Utahns are falling behind on their mortgages and losing their homes to foreclosure, but Utah's share of
problem loans is unlikely to reach the troublesome levels of many other states, a top economist said Thursday.
About 4.15 percent of mortgages in the state were at least 30 days past due in the fourth quarter of last year,
up from 4.01 percent in the same three months in 2006, the Mortgage Bankers Association reported Thursday in
its National Delinquency Survey. That's the 11th lowest rate nationally and well below the state's high of 5.3
percent in 2003. Nationally, the delinquency rate is 5.82 percent.
Utah's foreclosure rate - the percentage of loans in the foreclosure process - rose to 0.8 percent in the fourth
quarter, up from 0.61 percent in the same quarter in 2006. But it remains the sixth-lowest of all states and far
below the state's high of 1.7 percent in 2003. Nationally, foreclosures hit an all time-high of 2.04 percent.
"Utah is going to see higher delinquency and foreclosure rates like the rest of the country, said Gus Faucher,
economist with Moody's Economy.com. "But they aren't going to go up as much in the state as they are in the rest
of the U.S."
What's going on in the rest of country is bleak. Several negative national reports that came out Thursday,
including the one from the Mortgage Bankers Association, caused concern on Wall Street, where the Dow closed
down 214.60.
Another report, by the Federal Reserve, said that the equity Americans have in their homes has fallen to the
lowest levels since the agency began tracking the data in 1945. The National Association of Realtors said
pending U.S. home sales in January were at the second-lowest reading on record.
And Moody's Economy. com estimates that 8.8 million homeowners - about 10.3 percent of all homes - will have
zero or negative equity by the end of the month. Even more disturbing, about 13.8 million households - nearly 16
percent of all homes - will be ''upside down," meaning owners will owe more than they can sell their homes for, if
prices fall 20 percent from their peak.
Faucher, of Economy.com, said Utah's underlying economic fundamentals are better than many other parts of
the country. Though it has shifted into a lower gear, Utah still has good job growth and the state has had less
reliance on subprime lending - loans made to people with poor credit - and exotic mortgages, such as those that
keep monthly payments low but make it difficult for borrowers to pay down their loan balance. Some states, such
as California, have had high levels of these types of loans.
In Utah and other states, higher delinquencies and foreclosures stem from a slowdown in the state's real estate
markets, which make it more difficult for many financially distressed families to sell their homes quickly enough
and for enough money to satisfy their mortgage obligations.
While economists continue to debate whether the national economy is in a recession - a deep economic
downturn - many states, such as Michigan and California are mired in downturns deep enough for a growing
number of people to use the "R" word to describe it.
But not Utah, Faucher said.
"Utah should manage to skirt recession," he said.
However, there will be some pain in the real estate markets, he said.
Faucher believes median home prices in Utah peaked in the third quarter of 2007 at $206,000. Prices should
bottom out by the end of the year at $184,000, he said.
But Utah's 11 percent decline in prices is much less steep than Arizona's 24 percent and California, down 21
percent.
Prices will decline in Utah, Faucher said, because the state's run-up in home prices in recent years has made
homes less affordable and tighter lending standards has made it more difficult for many families to qualify for a
home loan.
But there is some help on the way. The Department of Housing and Urban Development on Thursday
announced it has raised the limits on new loans backed by its Federal Housing Administration.
That means home buyers in Salt Lake County, for example, can borrow up to $729,750 under the FHA
program, up from $362,790.
The new limits went into effect Thursday and remain in effect through the end of the year, HUD said.
The new limits will help more people qualify for homes, especially first-time home buyers and others who may
have less-than-perfect credit or minimum downpayments. It also helps more people refinance out of
adjustable-rate loans and other "exotic" loans that they wouldn't otherwise be able to get out of, said Tim Roush,
president of Veritas Funding, a mortgage company in Murray.
"This is going to be huge," he said. "There were a lot of people who have loans in the $500,000 and $600,000
range who need to refinance or who want to buy in that price range with small downpayments or credit
challenges."
Other good news: Thirty-year mortgage rates fell this week to an average 6.03 percent, mortgage company
Freddie Mac reported Thursday. That's down from the previous week's 6.24 percent, which had been the highest
level in more than three months.
lesley@sltrib.com
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