Most real estate markets go through what are called "cycles."
When the right market conditions align, home prices appreciate at a higher rate. If allowed to go un-checked, that same market will "bubble" meaning that the going prices have risen above what the rest of the market conditions can bear, and eventually the market will need to slow down and allow the other market conditions to catch up, or the bubble will burst and prices will fall.
The Salt Lake Valley is a huge valley. Home to about 30 cities and towns and over 1 Million inhabitants. When I started my real estate career here 10 years ago, home appreciation was in the 2-5% range. Nothing spectacular. It was estimated and understood that you would need to stay in a home for at least 3 years to break even (or, in other words, cover the costs of reselling the home).
When the "big boom" began, Utah was proclaimed as one of the most undervalued markets in the country. Not only did investors notice and begin buying up homes, but there were also many people who migrated to Utah from other states, bringing their home equity with them and seeing how much more they could get for their money here vs. where they came from. What were "normal" home prices to those who lived here were "clearance" prices for those who were moving here. (Not to mention taxes being sometimes 1/2 to 1/3 of what the Buyers were used to paying.)
Over the past few years, prices rose dramatically to meet the demand. Because of the heated market, (we saw appreciation rates above 20% in some areas last year) there came a period where there were many Sellers listing their homes at 20% above market value. Land prices shot up and so did the cost of labor and materials. New construction prices were shooting up, sometimes $5,000 every few days.
Buyers began to realize that many homes were overpriced and even though there was a lot of inventory, many Buyers ignored the overpriced listings. Homes that were priced right would sell within a few days of listing, often with multiple Buyers vying for the contract. We had an interesting situation in that it WAS a Buyer's Market, yet savvy Buyers (with Agents who represented them) were still involved in multiple-offer negotiations, usually more common in a Seller's market!
Utah Buyers were cautious and just before many markets nationwide began to crash, Utah's appreciation rate began to slow. This is actually one of the saving factors for Utah's real estate market. Appreciation HAS slowed, but it has still remained positive throughout most of the state.
The Utah economy still thrives today with a very good employment rate and a bright future. Unless they overpaid for the home when they bought it, most Buyers who bought during the boom should still be able to sell their homes and walk away with some cash.
Other than some builders who are still hanging on to their inventory, the rest of the market has slowed down to a reasonable pace. That's not so bad really. Considering the market could have gone negative like hundreds of other markets around the United States, returning to the status quo of years past isn't such a bad thing.
Utah could just as easily have continued in the frenzy and caused the bubble to bust. I have to believe that most Buyers had agents who gave them good advice during the past year. Advice like:
Ignore the overpriced listings.
Be aggressive on the at-or-below-market listings.
and
Be willing to walk away from negotiations if the price exceeds the market value.
The Utah economy still thrives today with a very good employment rate and a bright future. The best thing going for Utah today is that it appears that it will avoid a dip in actual Sold Prices.
Still, there are a lot of overpriced listings on the market. The advice today is: Work with an Exclusive Buyers Agent: An agent who will work exclusively on your side. Working with an EBA, you can still get a home at the right price.
History would suggest that Utah's appreciation rate will eventually slow to a 2-5% appreciation rate and chug along. Eventually, other large markets will go through their "cycles" and their prices could someday make Salt Lake one of the most undervalued markets in the country once again.
Homebuyer Representation, Inc. is a Real Estate Brokerage that services Salt Lake City, Utah and surrounding areas. Agents are Exclusive Buyer Agents (EBAs) and represent BUYERS ONLY. For Free Reports or a Free Consultation, contact Homebuyer Representation at (801) 969-8989 or click the highlighted links in this paragraph.
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