What is happening in the real estate market?  Are we out of the woods yet, or are things really getting better?  ”Real Estate” is such a broad topic that it is hard to pin exactly what is happening in the market on any given day.  However, there are indicators that do show trends in the market.

Perhaps the best indicator is the price of homes.  Home prices typically vary throughout the year, with spring and summer months bringing higher prices that winter months, in our Utah market.  Quantity of homes sold also follows this similar trend.

But to really add context to what is happening in the market, a historical look at home prices can be very helpful.  The following graph illustrates the average prices of homes in the 3rd quarter of each year along the Wasatch Front going back to 1996.  Click on graph to enlarge.

Average Home Sales Prices Annually Each 3rd Quarter, Utah, Salt Lake, and Davis Counties -- MLS

As you can see, something is not right with this graph.  From 1996 to 2004, it is a relatively steady increase in prices.  Predictable, healthy.  However, from 2004 to 2007, the average home price along the Wasatch Front soars nearly $100,000.  What happened?

Economics 101 teaches that supply and demand determine price.  There was no a shortage of homes during this time.  As a matter of fact, more homes were sold.  There wasn’t a sudden increase in population.  (We are growing here in Utah, but not THAT much in 3 years time!)

What happened was an external factor that directly affected our markets as well as markets throughout the country.  The external factor???   Drum roll please….

The Federal Government of the United States.

There was an interesting notion in DC that “everyone should have the right to own a home.”  That’s great!  But what they did was change the regulations for lending practices to allow those who normally wouldn’t be considered eligible for a loan to now have the abililty to get loans.  Crazy new lending tools were introduced that made it easier for ANYBODY (doesn’t even matter if you declared bankruptcy 3 months ago!  We’ll get you financed!) to get a loan.

1. Sub-prime mortgages were offered to those with bad (sub-prime) credit.
2. ARMs (or Adjustable Rate Mortgages) were offered to those who couldn’t afford payments.  They got a screaming rate up front, then in a year or so, their rates would adjust back to where they should have started out.
3. Stated Income Loans were loans that didn’t even require income verification.  If you had good credit, then obviously, no matter what you said your income was, that’s probably what you could afford.
4. $0.00 Down. Need money to buy a $200,000 house?  Nah, we understand, you don’t have any money!  We’ll collect it from you later.

Well, times were good, for a little while!  Then,  people started getting behind on payments, ARMs started adjusting up, people realized they might be in over their heads, etc.  When the house of cards started collapsing, the whole house came down, affecting not just the real estate industry, but the whole world economy.

So, that’s where we are today.  It is an obvious downward trend.  Hopefully things will flatten out soon.  They keep saying so in Washington.  We can only hope.

Washburn Real Estate Agents work all along the Wasatch Front, including Utah County, Salt Lake County, and Davis County.  As REALTORS®, they look forward to helping you in your real estate needs.

Currently, Liesha Geddes has land listings in Pleasant Grove in wonderful neighborhoods.  She also has several residential listings in Orem, and she would love to help you!

Christine Anderson has listings in Davis County, and is currently working with buyers in Davis and Salt Lake Counties.

Mike Washburn has several short sale listings, as well as conventional listings.  Mike is also working with several foreclosure properties.

Jeremy Washburn is working with several new home builders as well as foreclosure listings.