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Summit County Foreclosures - What is the Real Story?

Posted in: Buyers, Sellers, Our Newsletter
By Cornerstone
Apr 11, 2010 - 8:57:21 PM

If you read the Denver Post or the Summit Daily, you may have seen a recent article about foreclosures in mountain communities.  The article generalized about our resort real estate markets but also specifically mentioned the number of foreclosures in Summit County.  The Denver Post called it a "Mountain of Foreclosures," but we think that in some ways they are making a mountain out of a mole hill.

If you didn't read it yet you can read it here: Foreclosures Becoming More Common in the High Country

It's not that we are against reporting negative news about the Summit County Real Estate market, if it is factual.   And yes the foreclosure rate has in fact gone up for the last two years.  However we do believe that the article should accurately portray the current situation, and not dramatize news and make it sound much worse than it is.  Especially when they are using personal opinions to do it.

There are some key details that this article did not mention.  They say that there have been 95 foreclosures in Summit County so far this year.  However that number includes all of the properties (timeshare and non-timeshare) that entered the process (ie fell behind enough on their payments for the bank to begin foreclosure proceedings). Typically only a fraction of the properties who start the Summit County foreclosure process end up going to auction, because in many cases the owner catches up on their payments, or they sell the property and pay off the loan.   While it is more dramatic to report the total number of "foreclosures" that enter the process, many of these do not matter because they are eventually removed from the list and do not impact the market. 

For example in 2009, the article states that 300 foreclosures were "logged".  That is correct, however the more relevant number is 48, which is how many non-timeshare properties actually went through to auction, and the owner actually lost the property.  Those are the ones that can have an impact on the property values in the surrounding area if they are sold at a huge discount.  Again, 300 makes for better news, but does not give the full story.

The next piece that they are missing is what the number 48 means as a portion of the whole Summit County Real Estate market.  There are over 26,000 properties in Summit County.  As a fraction of that, 48 makes up less than one quarter of one percent, or 1 in 541.  This is having an impact on our market by causing downward pressure on prices from buyers who are shooting for the lowest price possible. However our prices are not plummeting due to there being a foreclosure on every block, which is the case in some areas.

Although the national news may lead you to believe that everyone is underwater on their loan, that is definitely not the case in our area.  Most of our second home buyers put down a decent down payment, usually 20% or more.  Even some our clients who bought at the peak of the market still have equity, and anyone who bought before 2006 is probably doing just fine. 

In addition, not all of our owners have a loan.  In 2009 an average of 40% of the real estate transactions were all cash.  That takes almost half of the current properties out of the running for any potential for foreclosure.  (On a side note, it also means that almost half of our buyers are indifferent to any changes in loan interest rates)

As for using personal opinions, here are two quotes from the article: "Bob New, a Vail-area broker who specializes in distressed properties, said projections show foreclosures this year will climb another 50 percent over 2009 numbers. Recovery is going to lag the rest of the nation, said New, citing fewer buyers and plummeting values." and "'Demand for real estate has just dried up,' said Ryan McMaken, an economist and director of community relations for the Colorado Division of Housing."

This makes the situation sound horrible.  However even if Mr. New is correct, our foreclosure rate would have to go up by over 500% to reach a level of 1 in 100, which would still be fairly low.  We also differ on whether we will lag in our recovery.  That could be true, but so far signs are pointing in the other direction, with four out of the last five months showing increased real estate transactions and volume over the previous year.  We have seen buyer demand and activity slowly but steadily increase over the last 12 months, both statistically and anecdotally - we are busy working with buyers.  Although we may never be back to the highest levels, we are moving in the right direction.  So we are not sure we agree with Mr. McMaken's broad statement, either.  The urge to have a place in the mountains never went away, but the confidence to buy did.  Once the stock market is stable, the economy is back on the right track and people are secure in their jobs again, we will likely see a return of buyers willing to pull the trigger, and it will grow from a trickle to a more steady flow.  They will probably be more conservative, and lenders will have tougher requirements than in the boom, but that is not a bad thing. 

No one can truly predict what will happen and when, but there are arguments on both sides.  Remember this time last year when some economists were predicting that both inflation and interest rates would have skyrocketed by now?  So our question is, why does the paper only report the worst news and predictions, when there are two sides to every story?  Why all the doom and gloom when there are also people who believe that a slow and steady recovery will happen over the next year or two?  They act like we will never recover, but we will.  There will be a bottom to the market, and we won't know we've hit it until we are on the upswing.

Our advice is to make sure you have the full story, and then form your own opinion.  Our job as real estate agents is not to convince you to do something you aren't comfortable with.  Our job is to help you do what you want to do, and if that is to buy or sell a property in Summit County, we will give you the best service possible.

If you would like to receive our monthly email newsletter so that you can track our market statistics on sales and foreclosures (plus get our monthly market analysis and top good deals in each area), please Contact Us and we will add you to the list.


Cornerstone Real Estate Company

23110 Hwy 6 #107
Keystone, CO 80435

111 A Lincoln Avenue
Breckenridge, CO 80424

970-513-8200 Office
866-441-0112   Toll Free

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