We are now into the second half of 2022, so let's look at the first half of the real estate market conditions. Here is a great infographic showing the past two years, specific to the Greater St George area, residential homes.
It's important to note that while inventory is much higher (June 2022 active home inventory is 28% higher than May 2022 active homes), inventory is STILL lower than pre-covid era numbers. In June 2019, the active home inventory was 961; in June 2022, it was 612 (36% lower). We can't say (yet) that the inventory is drastically inflated, but we can suggest that we are in a market shift. June 2022 SOLD inventory was at 284 while (pre-covid) June 2019 was at 328 (that means we are about 15% less in sold homes).
Is the crash coming?
I don't think "crash" is the correct word—"correction" is a better word to describe the likely housing future. Will we see a price decline? Likely.
Will we see foreclosures and defaults much like 2007ish? Probably.
I don't think we will see the prices we had in 2007, but I DO believe we will witness similarities in the events. I think prices will come down, and we will have borrowers underwater on their mortgages. I think we will have job losses that will compound the issues (like the 2007 era). We will have "stellar credit" owners who paid top dollar for their home and others who refinanced or added a Home Equity Line of Credit (HELOC) that will need to sell---the loss may incentivize "walk away owners," which will increase foreclosure activity.
Interest rates rising are also going to compound the HELOC issue, whereas the owners making HELOC payments will double, triple, or quadruple due to increasing rates. Currently, lenders are pushing variable rates as a method of achieving a lower payment. While this may be true, it is also true that rates will continue to rise, and therefore payments will increase too. I think this will contribute to the "new" crisis.
Many argue that the lower lending standards added to the first market meltdown, which I agree with—but even then, we DID have "high credit score" people making decisions to walk away (knowing their great credit would take a hit). I think we will see that again. I don't believe the shady lending practices blamed on the 2007 meltdown will be applicable now, but I think the end results will have similarities.
I do not think we will see prices dip as low as they did, but we will see prices back to pre-covid numbers. Prices have been 30-50% higher the past couple of years. If we revert, that will swallow the typical 20% down payment equity from our current bank-approved "strong financial borrowers".
Buy now or wait?
This depends on your goals. I think there is a reason to buy now—if you're buying for a longer-term hold and stay—lock in the rates and buy now. If you wait, the prices may be lower—but the rates will be higher. Also, during the last market crisis, it was difficult to obtain a loan for many people—if you wait, you're also risking that possibility as lenders tighten up. I do not think waiting will yield home prices being drastically lower. I believe we will reduce in price—but it will be a steady decent and not a sharp fall. Rising interest rates will likely outpace the prices falling, at least for this year.
If you're looking for a short-term investment, I suggest holding off a bit if you'd like to save a few dollars and have a bit more inventory selection.
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I am Paula Smith, Associate Broker with RealtyPath of St George. I have been a licensed, full-time real estate agent in Southern Utah since 2006. I have been selling residential real estate during all of the changes in the market and witnessing our St George area grow to become one of the fastest-growing cities in America. I keep my finger on the pulse and not only pay attention to what is going on, and I've accurately predicted future market conditions.
Allow me to be of assistance and earn your business. If you’ve got a home in Southern Utah that you’re thinking of selling and you’d like a property market report, I can send that to you.
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