Salt Lake Home Market: Has it Reached Bottom?
The question I most often hear is about the Salt Lake Home Market, and has it reached bottom yet?
Who knows?......... I don't, and I've been doing this Real Estate Thing for a lot of years.
I'm not sure any one knows.
What I do know is that just about every one thinks they know, and are not shy about writing about it, and well............Telling every one what they think they know.
As an example, Gadvise123, a blogger commented on the Salt Lake Tribune Article about the housing slump being "not over"....... Gadvise123 opined that.......
"Kelly Matthews from Wells Fargo is correct and so far he has been correct on his predictions about housing in Utah".
"We have a lot of price correction still to come in Utah. However I feel we might have more than a 20% decline to come. Markets tend to over correct and it's very possible that we could see an additional 30% or more decline in housing. With a recession very possible things in Utah are going to get much worse".
What Mathews said was....
Wells Fargo economist Kelly Matthews has predicted an overall home-price "correction" of as much as 20 percent. He thinks prices have fallen only about 7 percent so far and will fall more through 2009 and even into 2010 - with most of the pain being felt at the higher price ranges.
Lets do an unscientific analysis and see if we can support the 3 points in that paragraph by Kelley.
Prediction of a price correction of as much as 20%.
I can't support this, as in yesterdays blog, "how many Salt Lake Homes are in Pre-Foreclosure?" I pointed out some areas in the Salt Lake Valley that already have home pre-foreclosure rates in the 30%+ range. Other areas around SLC have foreclosure and pre-foreclosures pegged @ under 4%.
Price corrections in the areas that have high percentages of distressed homes for sale have already seen Real Estate values decline.(Herriman & Draper UT). We can expect to see more of the same in the Salt Lake Home Market. Conversely, those areas with small numbers of troubled homes for sale have seen house values increase slightly even in these times. A three bedroom rambler in Holladay as an example, will not approach a price correction of any where near 20%.
Home prices so far have fallen 7%
Once again, even in an area as homogeneous as the Salt Lake City home market, prices are a LOCAL phenomenon. In areas of the South Valley like Herrimans Rosecrest, that have experienced rapid growth in recent years with a flood of construction of New Homes and Condominiums, prices have already experienced downward movement well in excess of 7%.
On the other hand, In most cases,a condominium in Murray UT, either new or previously owned has yet to depreciate. The reason?..... The area & the product.
The greatest impact is in the higher price ranges.
This is a fact, but is less a mystery than an economic truism. The facts are that in Utah in general, more luxury homes were built than even a good market would support.(more homes than qualified buyers). A high percentage of homes that have lost significant value, are New Homes (builders inventory) that are being sold at or below cost, to maintain some sort of cash flow, and avoid foreclosure.
The impact of rising interest rates are more sharply pronounced in the higher price ranges.(both new homes and previously owned). As was pointed out in the article, a 1% increase in interest rate can increase the monthly payment on a $600,000 home by almost $500 dollars. It also reduces greatly the pool of qualified buyers in the Salt Lake Home Market.
So.... Whats my conclusion?.... Well I guess it's that blogger Gadvise123, and author Kelley Mathews are almost right.
In many areas the Salt Lake Home Market has not reached bottom.