Admittedly, when I read the article, “Don’t Fear Falling Prices”, published in Daily Real Estate News back in February 2008, I had a knee-jerk reaction (although I consider myself rather open-minded).  My initial reaction was one of seeing this work as just another suspect notion on the elaboration to justify the “falling” real estate market.  However, something prompted me to go ahead and bookmark this piece into My Favorites file allowing me to weigh on its content at a later date.  For the last three months, this article has continued to “nag” me like a missed birthday, and I find myself continuing to go back to reevaluate it.  You may by now be asking about its content, so let me insert it here for your reading pleasure:

 Daily Real Estate News  |   February 22, 2008

Don’t Fear Falling Prices
Yale Professor Robert Shiller, whose Case-Shiller 20-city home price index has become an industry standard, says people shouldn’t fear gradually falling home prices.”There’s nothing troubling about a gradual correction of home prices. If we keep our incomes at the current level and home prices go down we are richer, we can buy more housing,” Shiller says.But if home prices fall suddenly, Shiller says that could undermine housing as well as consumer confidence and the economy.There has been a misperception that houses will constantly appreciate, Shiller says. “Sometimes people will try to imagine that we can have both high home prices and affordable housing. But I can tell you that doesn’t add up,” he says. “You either have high home prices or lower home prices. And lower home prices are what we want, and people shouldn’t be afraid of that,” Shiller says. “Most of us care about our children and grandchildren, and these people have to buy houses so why would we want high home prices? We want economic growth, we don’t want high home prices.”

Source: Reuters News, Lynn Adler (02/21/08)

          Now for my surrender announcement: After talking to agents in both the Park City real estate market and in the markets of the Southern states (where I spend my spare time), I’m finding a variable that basically ties into this article.  This variable is the first time home buyer, first time “second” home buyer, and the first time real estate investor into rental property.  These are the folks that are emerging onto the “new” real estate scene.  The “why” and “how” behind this increase is (you’ve guessed it) lower home prices and the overall lower mortgage interest rate available.  There is indeed substance behind what we realtors are seeing as a “slower” market.  With that said, if you’re considering your first adventure into the real estate market know that we’re here to serve your needs at http://www.youinparkcity.com .   I’ll close by saying, I’d like to thank Professor Robert Shiller, for forcing me to expand my evaluation methods of looking at the glass “half empty/half full” theory, therefore allowing me to become a better real estate professional.  

by Cathy Ritchie

 Park City Real Estate Market First Quarter 2008 results are in.

          Utah and Park City have been some of the last areas to feel the decline of the U.S. real estate market.  Recent Board of Realtor statistics show that Park City real estate prices have held steady during the first quarter of 2008. During the first quarter, the number of listings has doubled and actual number of sales have fallen 45%. Single family homes sales fell from 209 in the first quarter 2007 to 113 first quarter 2008.  Condo sales fell from 247 to 136 in 2008. 
          While all these numbers can be very discouraging, you must look at each area independently.  Many of the larger developments have seen sales decline, while some of the established areas sales have held steady.  Several areas like Jeremy Ranch, Pinebrook and Silver Spring that have the ability to attract buyers who want to live in the Park City area but commute to Salt Lake City as well as those who want to live here for the skiing, hiking biking and golf have shown great resilience to the recent market changes.
         For Buyers, things have never been better.  There are more choices today than ever before (note the increased inventory mentioned earlier). Financing is currently very attractive for qualified buyers (current interest rates remain very low). Additionally, the maximum conforming loans limits have recently been increased to $749,750 for Summit County.  These new limits will revert back to the old limits at year’s end. 
          Sellers today, on the other hand, do need to be realistic and flexible in their pricing expectations.  While the market has softened, we have found that properties that have been priced to reflect today’s market have been selling.  The average “Days on Market” of sales have been less than 45 days recently for Mike and Ken’s listings with http://www.youinparkcity.com/   
         Experts suggest that while Park City and the state of Utah were some of the last real estate markets to feel the decline and are projected to be on of the first to recover and that declines will not be as sharp as many other areas in the nation. 

          Short sale and foreclosure property always seem to catch people’s attention.  The idea of really getting a “steal” on property peaks investor and home-buyer interest.  While a short sale can be a great deal, there are a few things to consider before you go searching for that “steal”. 

          First we should define a short sale.  A short sale is a sale of property in which the sale price is less than the value of the loans against the property.  Short sales can be initiated by the seller (property owner), but must be approved by the parties with loans which are using the property as collateral.   The purpose of the short sale is to try and sell the home before it is foreclosed upon (lenders tend to lose more money in a foreclosure sale than a short sale).

          The parties on the selling side are losing money in the deal.  The seller is losing whatever equity they had in the property (unless they got in with some type of “exotic” loan with no money down or cash out at the original loan origination (in this event the seller may not be losing real money, but is still damaging their credit)).  The lien-holders are losing whatever money that was their original loan less the sale price.  Secondary lien-holders stand to lose nearly all of their loan amounts.   All of these parties have to agree to take their losses.  None of them wants the loss and few of them want to admit they made a bad loan.   The loss that a 1^st mortgage holder is willing to accept is generally about 20%-40% (they usually stand to lose as much as 60% in a foreclosure).   Second or junior lien-holders also have to approve the sale.  If in anyone’s judgment the sale price is too low, they can refuse or send a counter-offer back to the Buyer.

          Timing may be the most confusing and frustrating issues that short sales present.  Unlike a normal offer and acceptance type of negotiation, once the offer has been accepted by the seller, the contract must be approved by all parties holding liens on the property.  These parties do not respond in a timely manner.  There is often quite a bit of bureaucratic “red tape” to get through in approving a short sale and just finding the correct representatives that can approve the sale can be very frustrating.   And while this process may take months (this is not an exaggeration) for the “third parties” to get approval back to the buyer, they will then ask for a closing within days. 

          This timing issue means that as a Buyer, you need to keep from getting emotionally attached to the property and have no need to move quickly into owning the property.   On the other hand, the Buyer needs to be able to move very quickly through their due diligence, evaluations and approvals as the third parties may ask for the sale to close within 10 days of their approval (in a “normal” sale this would be a 25-30 day process).

          Another curve that is thrown into the short sale is that the seller can (and will) keep marketing the home while the Buyer’s offer is awaiting approval in hopes of another or better offers.  So it may be months before you find out that your offer was bettered by someone else and you should have been trying to find something else instead.

          Buying a home can be very stressful and buying a home in a short sale situation is even more stressful.  That being said, there are some short sale properties available in the Park City area (though not nearly as many as in areas where the housing market is “depressed”) and they may represent a good value for the Buyer.  If you want to know more about the short sale process and whether it is an option that works for your Park City real estate needs, contact us at http://www.youinparkcity.com/