Because of its affluence, the Blaine County economy is buffered to some degree from the national economic engine, but there's no doubt the nationwide real estate crunch is hitting home.
In the first three months of 2008, seven Blaine County properties were foreclosed, according to data compiled by Sun Valley Title Co. It's a statistic that builds dramatically on three years of steadily climbing figures. In all of 2005 there were three. In 2006 the number jumped to five, and in 2007 there were 12.
In the midst of the nationwide sub-prime mortgage meltdown and official government recognition of a recession, the local numbers aren't encouraging. What's more, the first months of 2008 establish more than a trend. They show a potentially imminent peak.
"I certainly hope we're not heading for a spike, (but) this would be huge if it were to actually indicate a trend coming for 2008," said Peggy Pyle, title department manager at Sun Valley Title.
For Pyle, the trend raises significant questions about the health of Blaine County's middle class.
"Where are they going?" she asked. "What's it mean for the market? These aren't the wealthy that are losing their homes. It gets back to keeping the working people in our community."
The national stage
Blaine County is certainly not alone. Nationwide, monthly home foreclosures surged earlier this year with an 8 percent increase in January.
"January's foreclosure numbers demonstrate that foreclosure activity is continuing on its upward trend, substantially increasing from a year ago in many states," said James J. Saccacio, chief executive officer of RealityTrac, a California firm that analyzes such data. "However, the 8 percent monthly increase in January is not as precipitous as the 19 percent spike we saw in January of 2007, and several key states actually experienced decreasing foreclosure activity from the previous month."
Saccacio said it could be that some of the efforts on the part of lenders and the government—both at the state and federal levels—are beginning to take effect.
"The big question is whether those efforts are truly helping homeowners avoid foreclosure in the long term or if they are just temporarily forestalling the inevitable for many beleaguered borrowers," he said.
Through the first two months of 2008, RealityTrac reported that California, Florida and Texas accounted for the highest foreclosure totals in the nation. In February, Idaho ranked 20th, with a foreclosure rate of one in every 774 households. Idaho's 769 properties with foreclosure filings in February constituted a 5 percent increase over January. The figure was 162 percent above the level reported a year prior.
"Idaho foreclosures were up for both February and this time last year," Saccacio said. "Like many states, Idaho has experienced a sharp decline in home prices, and manufacturing jobs were down substantially last year. These factors have contributed to the overall rise we're seeing in foreclosures."
Ada and Canyon counties reported the highest foreclosure rates in the state in February, with one in 494 homes and one in 285 homes respectively. Blaine County is in the middle of the heap, with 1 in every 1,260 homes.
At current rates, RealtyTrac expects foreclosure filings to hit two million this year, or roughly one per 62 American households nationwide—a rate approaching heights not seen since the Great Depression.
Overall real estate
For area real estate agents, the cup is half full.
Windermere of Sun Valley associate broker Asa Chandler wrote in a February newsletter that Sun Valley was ranked recently as one of the top five hottest buyers' markets in the country, with a predicted appreciation rate of 5.1 percent for the coming year. The forecast puts Sun Valley just behind Honolulu and Maui in buyer-friendly markets.
According to Chandler, Blaine County's ample inventory, motivated sellers and fixed-rate loans at below 6 percent could mean a modest rebound in 2008, "with savvy buyers getting some excellent real estate values."
According to the Sawtooth Board of Realtors' database, there were 546 closed transactions in Blaine County in 2007, down more than 14 percent from the 640 reported in 2006. However, the overall dollar volume declined only 6.5 percent to $539 million.
Chandler said it is hardly a surprise that there are fewer buyers in the Wood River Valley marketplace.
"Fewer buyers translated into a decline in the number of sales," she wrote. "However, while the median selling price of resort-area homes and condos climbed 17 percent in 2007, the median selling price of single-family homes in the south valley fell 14 percent."
The local picture is one being painted in cities and towns across America as loans that were made to borrowers with little or no credit history, many of whom could not even afford a down payment, fail in ever-growing numbers. It's also a story of how local economic trends are intersecting with the real estate market.
Analysts also say the fallout from mortgages gone bad is spreading well beyond borrowers now in default. It has begun to engulf middle-class communities—communities like Hailey and Bellevue where Blaine County is being hit hardest. Sun Valley Title Co. Manager Cassie Jones said her firm has lost five or six employees since the mortgage crisis began.
It also foreshadows what could lie in store if mortgage holders default on what the Federal Reserve conservatively estimates to be $100 billion in risky subprime loans. Many of these loans were made in 2005 and early 2006, when standards were at their most lax and middle-class cities were blanketed with aggressive pitches from mortgage providers.
"I think a lot of people got into the sub-prime mortgage business," Pyle said. "When their payments increased they couldn't make them. Now value is going down, equity decreasing."
Even so, Pyle said there is a lot of money in the Wood River Valley, and that provides a certain buffer from the woes of many of the nation's hardest-hit communities.
Jones said that for people with no equity in their homes, sometimes it's cheaper to pay rent, and those who took too much of a risk to buy a home are turning their backs on their investments gone bad.
"One of the problems: People are just walking away from homes," Jones said. "The government is trying to do things, give longer grace periods.
"It's just a whole vicious cycle that starts here and who knows when it stops?"
What is foreclosure?
Foreclosure is a process that allows a lender to recover the amount owed on a defaulted loan by selling or repossessing the property securing the loan. The foreclosure process begins when a borrower defaults on mortgage payments and the lender files a notice of default, also called a lis pendens. The foreclosure process can end one of four ways:
· The borrower can reinstate the loan by paying off the default amount during a grace period determined by state law. This grace period is also known as pre-foreclosure.
· The borrower can sell the property to a third party during the pre-foreclosure period. The sale allows the borrower/owner to pay off the loan and avoid having a foreclosure on his or her credit history.
· A third party can buy the property at a public auction at the end of the pre-foreclosure period.
· The lender can take ownership of the property, usually with the intent to re-sell it on the open market. The lender can take ownership either through an agreement with the borrower/owner during pre-foreclosure or by buying back the property at the public auction.
Foreclosure laws vary from state to state. In Idaho, there is a 150-day process period with a 45-day sale publication.
Hundreds of properties are for sale in the southern Wood River Valley, making it a more challenging market for homeowners who have to sell for financial reasons.
