Utah Foreclosure and Default Rates Drop, Market Appears Stable

Posted in Foreclosure, August 31st, 2006 |

While the United States has seen a dramatic rise in the rate of foreclosure over the past year, Utah has shown new evidence of fighting this trend. During the first three months of 2006, fewer Utah homeowners underwent foreclosure than in 2005. Yes that’s right, the Utah foreclosure rate actually dropped. The rate of foreclosure for 2005 in Utah was 1.33 percent, which came down to .87 percent after March of 2006, which is the lowest rate in seven years for the state.

What’s more is that fewer homeowners were found in default (meaning late on their payments). This suggests that unlike in other areas of the country, Utah homeowners are having less trouble meeting their monthly payments. Both of these developments are remarkable for Utah, who in past years has been near the top in both default and foreclosure rates.

Many attribute the change to the state’s recently revitalized economy, which has produced many new jobs. Others point to the fact that while the nationwide real estate boom has slowed down greatly, Utah’s still remains steady and is even improving. These two causes could go hand in hand. As people are able to afford homes through new jobs and a growing economy which attracts more residents, the real estate market has been able to sustain itself.

However, the recent popularity of adjustable rate mortgages was not unique only to the rest of the country. Utah may see a spike in foreclosures again once ARMs move past their first year, when the rates actually start to adjust. And with home values appreciating which causes rising interest rates, more and more people will be unable to pay their mortgage. However, this is yet to be seen, and it would be unfair to attribute this happening in other states to Utah’s future. Utah has not had as many people use ARM loans to buy homes as some areas on the east and west coasts.

And perhaps more encouraging than the low foreclosure rate is the low default rate. Default is the first step towards foreclosure. If people are able to make their mortgage payments and avoid default, the will subsequently avoid foreclosure as well.