KSL recently reported about pending home sale prices dropping in Utah. Are we in for another crash or more of a simple correction and what does that mean for all of us?
The Utah housing market just saw nation’s largest share of price cuts. The market has accelerated so much the last couple years in our Utah market that it is in my opinion, almost completely out of reach. And it’s not just my opinion, but it’s buyers opinion as well. Things get to a point where buyers have to draw a line in the sand and say, “I just can’t afford this anymore.”
We’ve reached a point where that’s the case and it hasn’t been that long. When if you wanted to buy a house, you almost had to write an offer site unseen and be willing to go sometimes 50 to a hundred thousand dollars over the asking price, which is crazy. And truthfully a home right now in the Utah market still sells very quickly, but that seems to be slowing down and this is causing sellers to actually cut back.
So think about this. Somebody has a home, they bought it for $350,000 and the market pushes pushes, pushes, and they think to themselves, “Oh man, I want to sell this place for $850,000.” So the market is white hot and they list it for $850,000. But right now, maybe not as many buyers want to buy that home for $850,000.
So now they have to drop it to $750,000. Of course they wish they would’ve gotten that extra a hundred thousand dollars, but in the end, if they can sell the place for seven $50,000 or even $700,000, they’ve doubled or more than doubled their money in the equity gains.
So the housing prices have gone up so quickly that there’s still a lot of gains to be made, which is way different than it was in 2008. In 2008 a lot of homes were purchased with stated income loans, no down payment required. And a lot of people on a widespread level were sitting at a hundred percent of the value of their homes. So they owed a hundred percent of that value. And as soon as values dropped, even by 10-20%, they could not absorb that and a lot of them ended up having to foreclose.
Well, right now house prices have gone up so high and the loans are not overextended as they were in 2008. ASo there’s lots of equity cushion for house prices to drop and equalize this market. So in my opinion, I think market equalization is a great thing. I don’t want buyers to be left out in the cold. I also don’t want sellers to lose money, but, as clients come through our doors, they’re looking to get pre-qualified to make those house payments, especially first time home buyers.
It’s always gratifying for me to see that there’s homes inventory that regular Utahn’s just like you and me can afford and to keep our housing market very healthy. So that’s my take, tell me what you think about it, I’d love to hear your thoughts. Hope that helps!
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