I think the headline has it all right.

With the beginning of 2012 upon us, it is a great time to take a look at a new feature of mine: Real Estate Forecast 2012. The value of your home will be significant to you this year if you are looking to refinance your mortgage or to sell your home. It could also be significant to you as you look to save money on your annual property tax levy.

Before we start this discussion, I want to remind you that I like to use foreclosures as a temperature gauge for home values. Since 2008 when the housing market bubble popped, foreclosures, short sales, and bank-owned REO properties have all had a huge impact on home values. In a nutshell, when a house on your street was purchased at $250,000 and is sold at $180,000 because of a short sale or foreclosure, the value of your home falls as well because appraisers have to use “comparables” when determining the value of your home. In their process, they are required to use the most recent sales of like homes closest to your home. Real estate transactions in your area matter to you.

According to RealtyTrac, foreclosure activity has not slowed down in decent months. As a matter of fact, in some areas it has increased. Nationally, as of November (the last month data is available), there are 1,396,774 foreclosed homes on the market with an average sales price of $169,451. There are 17,055 foreclosed homes in Utah with an average sales price of $147,933. To put it into perspective, nationally 1 in every 579 housing units received a foreclosure filing during November 2011. Locally you would compare that to 1 in ever 290 homes are involved in the foreclosure process. Even Florida, where most people think real estate has been hit the hardest, only has 1 in every 358 homes involved in the foreclosure process.

Salt Lake County and Utah County still have the highest foreclosure rates in the state, even worse than Washington County and Summit County. 1 in every 206 homes in Salt Lake County and 1 in every 198 homes in Utah County are in foreclosure. Compare that to 1 in every 312 homes in Washington County and 1 in every 458 homes in Summit County. You can see how foreclosures are impacting the price of your home if you live in Salt Lake or Utah Counties. Most other counties in Utah that are actually measured are still worse than the national average, which means locally we have a ton of foreclosures that still need to clear the system.

The challenge to a current homeowner is that foreclosures impact the price that buyers are willing to pay for your home. Currently there is a large difference between the average sales price of a foreclosure when compared to the average sales price of a home that is not in foreclosure. For the month of November in Utah, a foreclosure sold at $147,933 while a home not in foreclosure sold at $165,557, a difference of $17,624. The 10% disparity in pricing has only grown over the last year. In December 2010, the same sales figures were at $209,642 and $210,558, a difference of less than $1,000.

We have not seen the bottom of the market yet. While it is unpopular to say that home values will continue to fall, I am afraid that Utah home values will decrease for yet another year. The large number of foreclosures and tight lending standards on mortgages will hurt the ability of many to buy a new home. I would suggest that if you are looking for a new home, try and get a FHA loan that requires less of a down payment than conventional loans. That means your loan limits will be lower, but if you have good credit, you could consider a FHA loan a viable option.

The U.S. economy is projected to not rebound significantly in 2012. In my opinion, the world economy will need to bounce back from the U.S. recession (if not depression) and the European debt crisis before we will see any significant improvement in the U.S. housing market. Locally, Utah will need to get the foreclosures cleared from the system before pricing will improve. That means if you are looking to refinance your home, you should look to complete it as soon as rates hit your “sweet spot” and you will be happy with your payment.

So 2012 looks to be a repeat of 2011 and even 2010. Home values will continue to fall, mortgage rates will remain low, and lending standards will still be tough. That means you should be very selective in who you work with on any new action on your home — if you are selecting a new loan officer or real estate agent.

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