Market Analysis: 1st Quarter, 2011
One of the most common questions that is presented to me as a real estate professional is the current health of the real estate market and what I expect it to be like in the future. Although forecasting the future is a tad bit more difficult to determine, I have included 25 different graphs analyzing the different markets throughout Utah, mostly in Utah County, for the 1st quarter of 2011.
To begin with, interest rates are still creeping up for the third straight week. Rates are very close to 5% on most 30 year fixed rate mortgages. I will post an updated mortgage trend graph on the blog by the end of the week. But congrats to all those who locked in rates between 4% and 4.5% because we may not see those rates again for a very long time. In addition, mortgage insurance for FHA loans will be increasing on April 17th. So first time home buyers should try to lock in a rate on a home prior to APril 17th if at all possible.
The results are interesting and revealing, and seem to be right on par with what was forecasted and with my personal experience in the last 3 months in real estate. Overall, prices in most markets are still falling. I believe this is partly due to an increase in the percentage of distressed properties being sold (foreclosures and short sales) compared to properties with equity owners. Many home owners right now seem to want to sell and upgrade but are slightly upside down on their mortgages. But they still have sufficient means to pay their mortgage so they are just riding out the storm.
There are many homes on the MLS that are flat-out overpriced and have no chance of selling, or appraising anywhere near the list price. I am seeing, however, that when a great deal hits the market, it is being snatched up and quickly, usually with multiple offers. Both personally and as a buyer’s agent last quarter, I was involved in over 6 multiple offer situations. My observations lead me to believe that there are lots of buyers actively looking to purchase a home but they are all looking for great deals which go very, very quickly!!
One market that seems to be recovered and stabile, and has been for almost 2 years, is the newer luxury/semi-luxury/upgraded home market. This includes homes between 3000-5000 sq.ft., built 2002-2008, 3+car garage and at least .25 acres. The prices on these homes went way up in the bubble, came crashing down quickly after the bubble burst, but have remained relatively stable since the middle of 2009. It is a great time to buy a home that many of us couldn't afford otherwise and won't be able to afford for much longer. I have seen dozens of 3500-4000 sq.ft. homes, completely loaded and on decent sized lots sell for between $250k to $300k. These same homes were selling for over $500k in 2007 and cost more to build than they are selling for today. It is a great time to purchase one of these properties while prices remain low and interest rates are still under 5%.
The starter home market, homes that have 1800-3000 sqft, 1-2 car garage and at least .1 acres, has basically continued to experience falling home prices for three straight quarters. Although it does depend on the area, these homes are facing their lowest home values since 2005. Again, I believe one of the reasons to be the fact that many of these home owners are not selling due to their inability to break even. I also believe that many of the home buyers who would normally be purchasing a home like this are purchasing homes in the now more affordable semi-luxury home class. It also appears that many of the home buyers who would be purchasing a home like this right now purchased last year or the year before due to the tax credits. Once the home prices of the next class up begin appreciating again and becoming less affordable for the average home buyer, and once the next round of home buyers becomes qualified and gains more confidence in the market, I believe these homes prices will stabilize and some of the nicer homes in this class will start showing up on the market again.
Condos and townhouses have taken the greatest hit. The two tax credits resulted in several years of future home buyers all buying at once, and many of them bought condos and townhouses. It is amazing to see that 0 (zero) condos or townhouses built 1990 or newer with 3 bedrooms between 1000 and 2000 sq.ft. sold in Provo last quarter. That is a remarkable stat! The lack of home buyers looking for starter homes, combined with the fact that regular homes are now so much more affordable and can compete with the prices of condos and townhouses, has resulted in plummeting values for condo and townhouse owners.
I do, however, see a bright light at the end of the dropping value tunnel for smaller homes and condos and townhouses. The 1st quarter is historically the slowest quarter of the year for closings while at the same time being a very active quarter for new listings. Most home buyers in this market are young families comprised of one or two students and/or new professionals with children who are in school. Many of these families purchase homes and move during the 2nd and 3rd quarters. In addition, unemployment is falling nationally and Utah is at the forefront of bringing in new employers into the state.
BYU approved condos and townhomes have however, remained very stabile throughout this downturn in the market, but experienced in my opinion their first quarter or two of slight decreases in value. As rental demand and prices have and likely will remain vert stabile in this market, this slight decrease in value may make this year the best time to purchase a BYU approved unit as an investment.
As real estate professionals, we keep hearing that market should be stabilizing through 2012 with a healthy market and appreciation beginning in 2013. Again, it depends on the market and the type of home that is being targeted; but experiencing how quickly good deals go, and how much above list price they are going for, I have little reason to doubt that we are beginning to turn a corner, if not already around the corner in certain markets.
Let me know what your thoughts are about the real estate market from your point of view with your personal experiences. As always, if there is anything that I can do for you, real estate related or not, don't hesitate to contract me anytime.
If you would like a home sales graph personalized to your home or the market you are looking into, all you have to do is ask, and I'd be more than happy to provide one to you.
Blue Line - Median Home Sales Price
Red Line - Total Number of Homes Sold
Green Line - Total Number of Homes Listed
2. Salt Lake County
3. Utah County
6. Spanish Fork
7. Utah County Luxury Homes, 3500+ sq.ft, 3+ car garage, .25+ acres, built 2002-2008
8. Provo/Orem, 3000-5000 sq.ft., built 2002-2008, .25+ acres, 3+ car garage
9. Lindon to Lehi, 3000-5000 sq.ft., built 2002-2008, .25+ acres, 3+ car garage
10. Saratoga Springs and Eagle Mountain, 3000-5000 sq.ft., built 2002-2008, .25+ acres, 3+ car garage
11. Springville, Mapleton and Spanish Fork, 3000-5000 sq.ft., built 2002-2008, .25+ acres, 3+ car garage
12. Payson, Salem and Santaquin, 3000-5000 sq.ft., built 2002-2008, .25+ acres, 3+ car garage
13. Utah County, 1800-3000 sq.ft, 1-2 car garage, .1+ acres
14. Provo, 1800-3000 sq.ft, 1-2 car garage, .1+ acres
15. Orem to Lehi, 1800-3000 sq.ft., 1-2 car garage, .1+ acres
16. Saratoga Springs and Eagle Mountain, 1800-3000 sq.ft, 1-2 car garage, .1+ acres
17. Springville to Spanish Fork, 1800-3000 sq.ft, 1-2 car garage, .1+ acres
18. Payson, Salem and Santaquin, 1800-3000 sq.ft., 1-2 car garage, .1+ acres
19. Utah County, Condos and Townhouses, 3 bedrooms, built 1990 or newer
20. Provo, Condos and Townhouses, 3 bedrooms, built 1990 or newer
21. Orem to Lehi, Condos and Townhouses, 3 bedrooms, built 1990 or newer
22. Saratoga Springs and Eagle Mountain, Condos and Townhouses, 3 bedrooms, built 1990 or newer
23. Springville, Mapleton, and Spanish Fork, Condos and Townhouses, 3 bedrooms, built 1990 or newer
24. Payson, Salem and Santaquin, Condos and Townhouses, 3 bedrooms, built 1990 or newer
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