Rates of foreclosure in Summit County and Utah as a whole may be staying well below the national average, but several indicators suggest foreclosures are or will be on the rise.

In the current frozen real estate market, many optimists suggest the low rate of foreclosure is proof of a healthy housing market that will rebound quickly. While this may be true, several indicators suggest the situation could get worse before it gets better.

The numbers

Realtytrac.com, a popular foreclosure listing site, says there are 37 such properties in Summit County. Two other websites, Foreclosure.com and Foreclosurefreesearch.com list about 20 such properties in the county.

The smaller number is closer to what is actually posted on an official board in the Summit County Recorder’s Office.

On Monday, the board held 17 notices. Recorder Alan Spriggs said the board is where the websites usually get their counts. Those 17 documents took up about two-thirds of the available space. He said there have been times when the board has been packed in recent months. Only five or six are usually posted in good years.

These are statutory foreclosures. A less common type are judicial foreclosures in which an entity owed money by the home owner requests a court to put a lien on a property or force foreclosure, Spriggs explained.

According to Utah State Courts spokesperson Nancy Volmer, the number of such cases handled by the Silver Summit District between July and December 2008 more than tripled as compared to that period in 2007.

The problem with the numbers

These postings or court records, however, don’t actually report the number of people losing their homes.

A court filing or posted notice is only an announcement of a process in which people owed money are going to attempt to reclaim that money.

Home owners have a grace period within that process to resolve disputes and avoid foreclosure usually about six months.

According to Spriggs, the vast majority do.

The writing on the wall

But while actual foreclosures are difficult to track, Spriggs said his office’s work volume is a pretty good gauge of the economy.

When times are good, people record their business activities. When times are bad, they record their efforts to reclaim assets. Recording is always going on, but more is done during prosperous years, Spriggs explained.

“Intuitively, I know the number of defaults is up,” he said.

For his own interest, at the end of every year Spriggs enters his office’s total work volume onto a pen and pencil line graph kept on paper taped together over the years. He stashes it rolled up with a rubber band in the corner behind his desk.

He’s able to visually see the growth of Summit County over the last 30 years with sharp dips in the 1980s and 1990s due to recessions caused by oil scarcity.

The middle years of this decade are drawn as large spikes as 2003 and 2005 set new records for, well, records, he explained.

The lines reveal something surprising. While many Americans found it hard to believe the current recession began in December 2007, the graph shows steep declines every year since 2006. Spriggs said he believes 2009 will continue that trend.

“It’s longer and deeper than what I’ve seen before in Summit County,” he said.

Gloomy predictions

James Wood at the University of Utah Bureau of Economic and Business Research said the most recent numbers he has from mortgage bankers for the third quarter of 2008 suggests the number of owners statewide delinquent on payments or in foreclosure is double that of a year prior.

Last August, right in the middle of that quarter, Wood released a report predicting rising foreclosure rates in Utah in 2009.

He based his prediction on a number of factors including a high number of Utah homes with adjustable-rate mortgages resetting in 2008 and 2009, a weakening job market and a contraction of new residential construction.

The two peak years for foreclosures, 1988 and 2002, were both preceded by years when job growth dropped to or below 1 percent.

The growth in 2008 was about .3 percent and 2009 is predicted to be around minus 2.5 percent, Woods said in a recent interview.

According to a recent report from the U.S. Bureau of Labor Statistics, the Greater Salt Lake Area (which includes Park City) saw wages and salaries in natural resources, mining and construction industries decline between 10 to 20 percent during the last half of 2008 as compared to the year before.

Those three industries, particularly construction, have accounted for much of the recent job growth in the region.

Wood said he’s worried about construction workers who bought homes when times were good, and are now out of work with poor prospects for the next several months.

“Homebuilders have been hit with a bloodbath,” he said.

Metrostudy, a company that provides data and analysis of housing markets, claims an over-supply of new houses has been affecting the region since the end of 2006.

According to a report issued by Eric Allen, director of Metrostudy’s Utah/Idaho region, the contraction of residential construction can be seen in the 58 percent decline of new home building starts in the fourth quarter of 2008 as compared to the year before. Annual starts of new homes declined 66 percent from that same period.

Too much housing inventory drives home values down, but inventory in the Greater Salt Lake Area has been diminishing recently, Allen said in the report.

Pertinent to Park City, the most dramatic decrease in inventory is among homes priced over $500,000. Unfortunately, the glut of supply is worst in that category, he said.

Worse, Wood said the number of homes back on the market because of foreclosure is about equaling the number of new homes being constructed state-wide, providing stiff competition for homebuilders. Again, lower home prices contribute to poor foreclosure rates.

“It’s a self-reinforcing downward spiral,” Wood said.

On the bright side, Allen’s report said one of the area’s top 10 best selling new-home projects in 2008, Bear Hollow Village Lodge Condos, is in Summit County.

If Wood is correct that falling homes prices combined with record level job layoffs will produce higher rates of foreclosure, it could bode poorly for the Snyderville Basin.

The logic behind it, Woods explained, is that people end up with mortgages worth more than their properties.

According to the most recent Park City Area Board of Realtors report, the median sale price of homes in the Basin dropped 18 percent. While the report’s median price drops or increases can be heavily skewed by low sales volume, the postings at the Recorder’s office suggest properties (both homes and vacant lots) in the Basin may be at higher risk for foreclosure.

At least four of the 17 were in Promontory. Half were in Silver Creek, Pinebrook, Jeremy Ranch and Summit Park.

Wood said it isn’t unreasonable to fear that state-wide foreclosure rates could match or exceed the national average by the third quarter of 2009.