From Deseret News archives:
Foreclosures can decrease neighboring home values
Neighbors matter when it comes to putting a price tag on homes. Appraisers use comparable sales data to calculate the value of a home, a number lenders require for selling and refinancing. And comparable sales in neighborhoods plagued by foreclosures knock down the value of homes.
The problem, which makes it much more difficult for borrowers to pull cash out of their homes, is another sign of how a sick housing market infects the entire economy, one neighborhood at a time. If borrowers are unable to refinance at lower rates, that could cause even more foreclosures, mortgage brokers and appraisers say.
"The abundance of foreclosures has turned into a snowball effect," said Karen Mann, a San Francisco Bay area appraiser.
The number of U.S. homes facing foreclosure jumped 57 percent in January from a year earlier, and more than 230,000 homes nationwide received notices from lenders, according to RealtyTrac Inc., based in Irvine, Calif. Nearly 60 percent more U.S. homes faced foreclosure in February than in the same month last year. The highest foreclosure rates have been found in California, Florida and Nevada.
Now, some of those homeowners are walking away from mortgages and turning properties over to their lenders.
Appraisers commonly base their calculations on property sales over the last six months within a half-mile radius of the property. But declining markets make that calculation difficult especially if there are no recently completed sales and a large number of nearby foreclosed properties on the market.
"It's difficult to get a good assessment of what the valuations would be in this type of market," said Global Insight economist Brian Bethune. "Everybody knows that there's some downward pressure, but how much? This whole appraisal process has become a lot more complicated."
Foreclosure listings don't represent the true value of neighboring properties, because they're often damaged goods, says Loreen Stuhr, a Las Vegas appraiser. "We see cases where, the homeowner, in frustration, has trashed the property before they left," she said.
A better approach, she said is to look at older sales of non-foreclosed properties, and make adjustments to take into account the market's decline a drop in home values of up to 2 percent every month in Las Vegas.
Rita Bradley, a Southern California appraiser, makes no apologies. Appraisers, she said, are obligated to look at all the properties in the area, including bank-owned properties on the market. "Just because you can pull a sale from five months ago doesn't mean it's really indicative of what's happening in the neighborhood today," she said.
Consumer groups have predicted that the wave of foreclosures would pull down property values and lower property-tax revenue for state and local governments.
Recent comments
Lots of motivation to raise your property tax, very little motivation...
TOT | March 13, 2008 at 4:50 p.m.
In a non-disclosure state, like Utah, I doubt that foreclosure values...
Sam | March 13, 2008 at 1:39 p.m.
Foreclosures in your neighborhood are only a problem if you are...
Stewart | March 13, 2008 at 11:56 a.m.
- NFL: Week 12 recap 12:50 a.m.
- '12 Days' bill would top $87K 12:35 a.m.
- Study finds autism therapy works 12:35 a.m.
- Boy shot following traffic stop 12:35 a.m.
- Sports on the air 12:24 a.m.
- Herbert builds his team of rivals 12:21 a.m.
- Corroon a step closer to governor 12:21 a.m.
- Monday on TV 12:18 a.m.
- Editorial: East, West and religion 12:17 a.m.
- A deficit commission? 12:17 a.m.
- Hall mouths off about hate of Utah
- BYU is champion of the state
- Cougars beat Utes in overtime
- Credit Coug defense for win
- Marriage definitions vary widely
- Field goals, penalties doomed Utes
- Cougar defense rose to occasion
- Banged up Jazz get best of Blazers
- Jones' joy for life remembered
- Fantasy is reality for BYU professor
- Hall mouths off about hate of Utah
869 - Cougars beat Utes in overtime
473 - Max Hall issues apology
145 - BYU is champion of the state
137 - Man trapped in Nutty Putty cave dies
117 - Cave to be sealed with body inside
116 - Rivalry Week is highly profane
90 - Hall's legacy measured today
79 - Hall's pain reflects self-betrayal
68 - Utes fall to Seattle U. at home
65
If you wait until Cyber Monday to shop, you may miss some hot deals.
I find it interesting that many of the same people who say that we can't...
None of these teams is going to be easy. They all have fine football...
Max, no apology was necessary, but the apology was polically correct. If...
Very good piece of writing, Amy. You summarized what many of us have been...
How is a top 25 finish make Utah a top twenty team? I think what the poster...
90% of the BYU & Utah fans have class, and Hall knows it. If you don't...
This might be my favorite article I've ever read from the Deseret News. Kudos.
Thank you for not giving up and don't give up now brother and sister...
Dr. Lois Lee's work with children who are victims of child sexual...
Look at the preview for Pixar's "Up". The whole move is summarized in...

