Foreclosures a problem, but not increasing, experts say
November 9, 2010
Park City Realtors are taking issue with a Wall Street Journal article from Oct. 23 that argued more foreclosures will soon enter the market.
Local experts say the Oct. 27 Park Record article on the Park City Board of Realtors 3rd Quarter Report may have been overly rosy, but the national article was inaccurately pessimistic.
The WSJ article said the foreclosure scenario nationally is improving, "But the fallout from the crisis is beginning to be felt in real-estate markets across the country, particularly in places dominated by vacation homes and investment properties. Some of the worst-hit areas could be Western ski towns, because fall is the busiest time of the year for sales."
The justification was that governments are beginning to investigate banks’ foreclosure practices, and that is motivating lenders to unload large numbers of distressed properties onto the market especially in resort towns.
The first item local Realtors take issue with is the claim "fall is the busiest time of the year for sales." In fact, said Jim Lewis from Summit Sotheby’s, fall is the slowest time.
"This is our shoulder season; no one is in town," he explained.
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The WSJ quoted a Park City Realtor from Summit Sotheby’s saying banks were trying to unload property for below-market prices. Lewis said he’s familiar with that situation, and that is indeed what was happening, but wouldn’t call it typical.
"The trend is definitely favorable right now," Lewis said. "That doesn’t mean there aren’t going to be more foreclosures but the number of new homes coming on is definitely down."
Lewis said most of his statistics come from Rick Klein of Wells Fargo Bank. Currently about one-third of Park City real estate sales are of distressed properties, and that is serious, Klein explained.
"That statistic came from me and I was shocked," Klein said. "Foreclosures remain a strategic threat to price discovery."
They could still cause sale prices to drop lower, but the number of foreclosures in Summit County is improving, Klein added.
It’s hard, if not impossible, to track the number of mortgage-payment delinquencies in a small area. It’s easy to watch the number of Notices of Default. Those are declining, which is why local Realtors are optimistic about Park City’s foreclosure market, Klein said.
"There is both optimistic news and reasons to be reserved," Klein added.
Jess Reid of Jess Reid Real Estate said he is reserved, but still expects recovery to continue "puttering along."
There are many buyers still "sitting on the fence," Reid and Lewis agreed. That’s why recovery isn’t happening faster. But it’s a part of a natural recovery and is not a problem, they said.
"In my personal opinion, it has nothing to do with the freeze on bank foreclosures. It’s just part of the slow healing we’re going through," Reid said. "Full confidence levels are not back."
Steve Roney, head of Prudential Utah Real Estate, said he considers the foreclosures and short sales occurring to be a small portion of the overall market. He does not foresee any lenders unloading large numbers of homes on the market locally.
His optimism comes from the fact that Park City has been outperforming its ski-town competitors in real estate sales this year, he said.
Further evidence that market recovery is on track despite the large numbers of foreclosures is the success of some neighborhoods, Lewis said.
Promontory has had 110 sales in 2010. In Empire Pass, there have been 44 sales so far this year versus five during the same period last year.
"Last time I looked I didn’t see any short sales on the 52 condominium listings in Empire Pass," he said.
Current sales momentum is enough to remove distressed properties from the market in a few areas, he added.
Kevin Shields, general manager at Westgate Resort, said his sales team has had great success. In the last three months 15 condos were sold. People are responding to marketing and have a sense of urgency to not lose out on great deals, he said.
Tom Bennette, a development attorney with Ballard Spahr, said he has both lenders and developers as clients. He doesn’t see any signs of a worsening foreclosure market locally, he said. It may happen elsewhere, but not likely here.
Lewis said the situations in which banks are "dumping" properties that he knows of can be compared to bombs. They’re few in number, but may make a big impact when and where they occur. Often the problem is bank analysts not listening to local experts about the local market, he explained.