Why We Have Not Hit Bottom...And Why First-Time Homebuyers Should Not Wait

The good news is sales activity is up. Unfortunately, the same is true for foreclosure activity. But prospective first time home buyers would be wise to act now and take advantage of an $8,500 tax credit and low interest rates now available to them. The number of REOs (Foreclosed bank owned homes) has continued to increase since June of 2007. In summer of 2007 we only had 39 REOs in Utah. The number has skyrocketed over the past two years, now approaching 800 REOs. What's worse, Utah is now #5 in the nation in per capita foreclosure activity.

When a property is foreclosed on in a neighborhood, it drags down the prices of all the homes in the area. And when home prices decrease, more foreclosures are likely as homeowners lose their equity cushion. So when will this foreclosure activity stop? It could be a year or two. Places like California have seen a slow down in foreclosures due to moratoriums but they expect another surge of foreclosures when the government hold on foreclosures is lifted. I expect Utah to trail California in foreclosures like it did in home prices leading up to the boom. Until we see foreclosure activity decreasing in California, we should not expect the same in Utah. With all this bad news, first-time home buyers may be reluctant to purchase. In actuality, this is a very opportunistic time to buy your first house. The majority of buyers are at the $200,000 and lower price range. This price range is the least susceptible to further price drops. Also, interest rates are very low right now and experts do not expect them to go much lower. Finally, the $8,500 tax credit expires Dec 1, 2009. With all these factors in mind, there is no reason for the first-time home buyer to wait.

source: WFRMLS, Realtytrac