Economists: A Good Time to Buy Bank Foreclosure Homes

by Peter Vernon on Finance Foreclosures

Now is the right time to buy bank foreclosure homes. This is the message that Utah economists want to send to prospective homebuyers, citing low mortgage interest rates and significant drop in home prices as incentives for buying existing and foreclosed homes.

Kelly Matthews, economist at Wells Fargo and Co., said that the current Utah market condition is a historically better opportunity to purchase houses, adding that the dramatic decline in property prices and low mortgage rates are incentives that potential homebuyers should not ignore.

Matthews said that the average property prices in the county of Salt Lake dropped to $278,472 during the last quarter of 2008, compared with $286,250 in the same period in 2007. However, he noted that the average home price in the county last year was still higher compared with the 2004 average price of $198,394.

He pointed out that home affordability today is similar in 2004 because interest rates which was 6 percent five years ago, is nearing 5 percent this year. He said that a family purchasing today would shell out the same amount for mortgage payment, which is 24 percent, compared with almost 23 percent in 2004.

However, some economists are cautioning prospective buyers that the market may have not yet reached its bottom. They do not suggest purchasing properties as investments. On his part, Matthews said that good candidates to buy an existing or foreclosed house today are families in need of a roof under their heads or growing families.

Meanwhile, University of Utah's Bureau of Economic and Business Research director Jim Wood said that the market is closer to its bottom but is not yet there. He noted that there is no strength or improvement yet in the single-family home market.

Wood believed that home prices will take a long time to budge from its current slump even if the housing market recovery begins and property values stop its decline. He said that home price gains will start modestly, perhaps 3 percent annually.

He pointed out that there will be no price appreciation until the economy shows some growth. This is because the job market in the state is in serious condition than previously thought and foreclosure continues to rise unabated.

Economists said that if Utah's foreclosure problem gets worse, it would unravel whatever progress in the recovery the state has made so far.