Utah Housing Market Meets Its Match
Ever notice any super human creature have some weakness that with the proper knowledge applied can defeat it? Superman had kryptonite, Dracula has the wooden spike, werewolves a silver bullet.
It appears 100% financing is the kryptonite of Utah’s housing market as well as the other remaining strong markets like those in the Pacific Northwest and North Carolina.
Utah’s average home price fell 1.2 percent in the first quarter to $272,503 from the same period last year, a new report shows.
The Utah Association of Realtors on Friday released home-sale data for the first quarter.
While some counties showed big gains, others showed losses. Salt Lake County showed minuscule appreciation after a sales slowdown of almost 50%.
The slowdown began last summer
when the credit markets began to show weakness.
“Our market started to slow down around August and September of last year,” said David Mansell, president of the Utah Association of Realtors. Prices are still up in many areas, but if sales remain low compared with previous years, home values could fall as well.
Wall Street seems to have come to terms with the new realities of the credit marketplace, but it will take some time to work its way through. Bubble markets like California, Florida and Nevada have significantly lower housing prices to drive the existing sales, but recently strong markets like ours and the others mentioned have struggled. CNNMoney noted:Some of the last, best housing markets - the ones that continued to climb even as the rest of the country cratered - have turned south lately.
Seattle, Portland Ore., Charlotte, NC, and Salt Lake City all posted home price gains during 2007, even as more than half of the 150 markets tracked by the National Association of Realtors registered declines. Now they’ve joined the losers.
Easy credit, speculative frenzy, fraud and many other conditions contributed to the increases. I don’t think we can blame any one factor for the boom. Likewise, we can’t blame any one factor for the decline. Credit is not so easy any more and will likely get tougher to get. The frenzy is gone. Fraud’s still out there though and will probably always be.
Buyers are slowly coming around to the new realities of the marketplace, though I think there’s a lot more to learn. I spoke to my friend that sells new homes today and he said nearly a dozen deals fell through temporarily because the builder hasn’t yet obtained FHA approval. Since so much easy financing was previously available, it didn’t make sense for builders to get FHA approval at additional expense. Today, they won’t be able to sell much without it.
I think that over time, buyers, sellers and lenders will adapt. The high-flying easy lending of the past few years will probably never come back, but eventually things will even out. The superheroes that meet their match always turn things around in the end. If easy financing is Utah’s real estate kryptonite, I suspect the market will find a way out before it’s too late.