Utah County Housing Slump We Cause This Chaos All By Ourselves

The Utah county housing market is starting to show some signs (even though their weak) that it maybe starting to recover from its current slump. For the past several years Utah county's real estate market has been hit really hard, with the price of housing being in a severe downward spiral that is causing problems in other related areas of real estate, and to think we achieved this chaos all by ourselves.
Back in the mid 1990's there was influx of large out of state businesses moving into Utah, many of them came to Provo and Orem area, to take advantage of the low wage scale (which was well below the national average at that time) and they wanted to profit from this. When the executives were moved out here to run their companies they found the executive housing to be about half of what they had been paying else where, and this was the start of a very strong seller's market that saw housing prices soar. All of a sudden, some of the smaller independent contractors change their strategy and were only going to build the large expensive homes. The public saw this and people (who could not afford them before) started to buy these large homes with the intent to flip them in hope of making a windfall.

With the influx of these new business coming in, wages also started to increase and it seems people thought they were now on the track to make lots of money. One of the reasons people enjoy living in Utah is all of the outdoor activities that are available and there are a lot people who love their water skiing, camping in the summer and snow skiing the such in the winter. People started to increased their buying and updating their toys (jet skis, boats, RV, ATV etc..) and most of them had soon over extended themselves.

To help relieve this debt crunch many homeowners started taking out second mortgages so they could payoff their over spending. The mortgage industry seeing this upswing in homeowners wanting to get second mortgages start offering special second mortgages that were based on 125% value of the home. The way the prices were skyrocketing, the idea was that the value of the house would soon over take the loan. It Did Not Work!

People started to realize that these big expensive homes (which now had glutted the market) were not
selling like they hoped and they could not keep up with the payments. Since most of the homes were
already had max loans, refinancing was not an option so they really tried selling their homes (and not
make a huge profit). Well this is where the problems really started to appear. When these homes were
being listed and they discovered the market value was well below the amount of existing loans, this
started started quite a stir throughout the real estate market.

Since most homeowners realize that they were running out of options. they could not refinance since
the house was worth a lot less than what was owed, investors could not get enough discount from the
lenders to buy them and some tried bankruptcy to stall the foreclosure process but in the end, a lot
of people lost their homes. A few of the people in the real estate industry had started to stretch the
limits of a transaction in order to try and help, but to get a bad deal done or one that uses unethical
means is not helping. Some of the things that had been tried would backfired, for example, when a
appraisers would over value a home, or a loan officer tried to get loans through they normally wouldn't
try and Realtors would write some creative offers. All of this started a trend that put the state of Utah
in the top 5 across the nation in bankruptcy, foreclosures and loan fraud for several years. The Division
of Real Estate took some strong steps to change that trend. They refused to renew licenses to many of
the appraisers who had been writing questionable appraisals, also many independently owned loan brokerages were shut down and some of the mortgage brokers even got jail time for loan fraud and the Realtors who had started using questionable practices were either fined, suspended or had their license revoked.

Fortunately the majority of the Realtors, Loan officers and appraisers ran their businesses according to
the guidelines set by the state and these problems started to correct itself over time, but most of the
damage had already been done. Now anyone who does business with real estate in Utah (even investors) had to change many of their questionable practices and had to start playing the game a little differently than before.

I firmly believe that the downward spiral we are now experiencing with the housing prices is just a
major adjustment to get the market back to where it was before that very strong seller's market took off.
Maybe there will be a time again when it does not take two incomes for a family with good credit to
be able to qualify for a reasonable home loan. The wages in Utah historical have never been high
enough (compared to the national average) to support large $300,000 plus homes for most families, but there always will be some contractors who feel there is still a market for these large homes. I lost count of the number of contractors who went out of business with a subdivision with several finished houses and several more at different stages of construction that they were unable to sell.
I figure in maybe another five years or so the market should be finish correcting itself, the cost of housing will be down to a more realistic value where people can actually afford to buy a home again and then we can sit back and watch this cycle start all over again.