Non-distressed home prices in Utah steady!
The Home Price Index was released for August 2011 and overall the numbers look encouraging.
Including distressed properties, which are short sales and bank owned properties (REOs), home prices fell nationwide by 4.4% from last August. When you take out distressed properties, prices only fell .7%. This is not surprising for many reasons:
1) Distressed properties tend to need a lot of work. The previous owners knew they would be losing their homes and often stopped maintaining the property. Some of these owners would go as far as selling anything that could be removed (light fixtures, cabinets, countertops, furnace, etc) to try to make some money off of the home. Many of these homes experienced some sort of vandalism and major damages as they sat vacant for months to years. (Demand decreasing)
2) Over the last 12 months the market has been flooded with distressed properties. (Supply high)
3) The quality and quantity of new construction has greatly increased in the past 12-24 months. With affordable new homes, many home buyers are deciding they would rather pay a little more for a brand new home then spend less upfront on a distressed property that requires thousands to get back up to par and may have several hidden defects discovered in the future. (Demand decreasing).
4) Many sellers have decided to sell their homes in this down market to be able to upgrade to a nicer, newer home. These homes have been well maintained and taken care of by the sellers. These equity sellers want to gain top value for their homes so they usually do what it takes to keep the home in top condition. Many of these homes are move-in ready with very little immediate maintenance required. Many home buyers are again choosing to purchase a turn-key ready home for a slightly higher purchase price than pay less for a project distressed property. (Demand for distressed properties decreasing).
I am personally experiencing these exact trends with the majority of my home buyers. Two years ago, the majority of my closings were distressed properties. Now, the majority are new construction or equity sellers. With the demand for distressed properties dramatically decreasing, the price for these properties have been decreasing as well to keep them selling.
Below is the Home Price Index of the nearby western States and how they compare to each other. As you see, non distressed properties in Utah have fallen only .6% in the past year:
CoreLogic August Home Price Index (year-over-year change)
(All single-family) / (Excludes distressed sales)
Nevada -12.40% -8.80%
New Mexico -6.30% -4.10%
California -6.20% -0.80%
Washington -5.60% -1.70%
Idaho -5.20% 0.20%
Utah -4.90% -0.60%
Oregon -4.00% -1.80%
Colorado -1.80% 0.20%
Montana -1.50% 1.30%
Texas -0.70% 2.40%
Wyoming 3.60% 2.40%
It needs to be pointed out that although home prices throughout Utah as a whole have fallen .6%, there are many markets in Utah that are steady and several that are actually experiencing solid appreciation and have been for the past 12-24 months. The majority of the decreases in home prices can be attributed to:
1) Distressed Properties (as described above)
2) Home Buyer Tax Credit - The tax credits, although good for the economy at the time, delayed the reset of home prices in several unique markets, especially that of starter homes, condos and townhouses. While more expensive homes (homes that tax credit buyers generally couldn't afford or qualify for) experienced dramatic price drops and a general reset in home prices back in 2008 and 2009, the resetting of these previously mentioned markets were delayed by the tax credit (see graphs below). As the more expensive home market has reset and been steady since early 2009, the first-time home buyer market has taken a drastic drop in home price over the past 18 months as the home buyer tax credits expired.
The criteria of the first graph is homes between 3500-4200 sq.ft., built 2004 or newer in Utah County and non-distressed. As you can see, homes in this market have experienced some appreciation starting way back from the first quarter of 2009.
Search Criteria: State is Utah, Short Sale is not Price subject to 3rd party approval or Price previously approved by 3rd Party, County is Utah, Year Built at least 2004, Total Square Feet at least 3500, Total Square Feet at most 4200
The criteria for this next graph is 3 bedroom condos and townhouses in Utah County built 1990 or newer. As you can see, this market faced a drastic collapse in home prices in the past 12-18 months that is only now beginning to steady out.
Search Criteria: State is Utah, Short Sale is not Price subject to 3rd party approval or Price previously approved by 3rd Party, County is Utah, Year Built at least 1990, Total Square Feet at most 1800, Property Type is Condo or Townhouse, Total Square Feet at least 1000, Total Bedrooms at least 3, Total Bedrooms at most 3
With the first time home buyer markets finally resetting and stabilizing, with an increase in demand for new construction, and with low interests rates holding steady, it finally seems like the real estate market here in Utah County and other major cities throughout Utah have turned a corner. The next 6 months, and until interest rates start increasing, may be the best time to buy a first-home, upgrade to a nicer home or buy an investment property than most of us will ever see again.
For the full article from Inman News, click here: http://www.inman.com/news/2011/10/6/home-price-index-falls-44-in-august
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