St George Market report… what's to come
Well…If I had the answer to "what's to come," I'd probably also have the answers for all human existence. It's a wild ride we are witnessing, and I've discussed the "what's to come" theory with many professionals in all facets of the real estate industry. While I stumble across like-minded articles —it continues to be a cause for pause and reflection, self-doubt, and reconsideration…as my opinion seems to be the minority of views from many in which I've discussed market conditions.
I'm going to stand firm with my theory, however…with my original instincts, beliefs, and speculation. I genuinely believe we will hit a housing wall. Will it be as severe and extensive as our 2007'ish housing disaster? Well, I'm not sure. I do think it will be extensive and have a level of severity. I believe the difference in the blowback will be more of a soft fall and not "freefalling" as what happened in 2007. Back then, the housing collapsed—Swift, hard, and seemingly overnight. Values plummeted, and the downward spiral was visible to the naked eye. I do not believe we will see the same rapid fate if housing does hit the inevitable wall.
Will The Real Estate Market Crash Again in St George?
I speculate the housing market will be different this time because any decline will likely be a slow descent. We will see the days of foreclosures rocking the industry and values receding, but I think the plummet will be more gradual and graceful. I do not feel the housing market can sustain itself at current levels, and I do believe that most areas are overpriced. Interest rates are ticking upward and will continue to do so. Higher interest rates will force some buyers out of the market. The demand is still very high now, and the inventory is meager—THIS is what is holding up the real estate market. The shift will occur when one or both of those change. The interest rates removing some buyers from the game are likely to begin the shift. Market volatility and uncertainty within the nations will likely cause some investors to pause cash purchases until the dust settles. Investor holdout will add to the shift by further reducing the demand.
Meanwhile, builders are feverishly hoarding and building specs…to release in groups to inventory starved buyers. Builders are busy fielding calls from the starving buyers, getting the specs ready to release to the highest bidder. Builders may not be paying attention to how many buyers may be retreating and less willing to pay hand over fist over asking. So, when the specs from multiple builders (locally and nationwide) become available around the same time, we've got a little more inventory. So, part of our supply chain will improve. Improved available inventory may contribute to phase two of the shift. Suppose the inventory becomes more plentiful, but buyers are holding back due to uncertainty or interest rates. In that case, now we have an issue with builders holding more homes than they anticipated having. They've got subs and bills to pay, so they need to get them sold.
When Will Price Reductions Happen in Real Estate?
Phase 3 of the shift….
As builders are reducing to get their homes sold, it will cause resale homes to keep pace. Buyers won't pay more for a resale if they can acquire new construction for less. Resellers will have to make competitive pricing cuts if more new construction is available.
During this phase, we will still have natural relocation. Perhaps going back where they came from, retiring, life events, or being forced to return to "in office" work. In theory, if prices are starting to descend because of the initial phases, say all this descent was slow and graceful, but now we are 25% below values (maybe in another year, or two, or three). Qualified buyers tend to put 20% down (on average). So, at this point, they are at a selling loss. What will it look like if we are 35% down in values? 45%? Back are the days of foreclosures and people walking away. I still do not feel that the foreclosures and any spiral will mirror our 2007 past, but I do think we will see many shades of similarity.
Should You Wait To Purchase A Home in St George, Utah?
No, if you are ready to buy—waiting may prove costly. If interest rates are ticking up—you may wait long enough to be in the same relative position (lower sale price, but higher interest—giving similar payments). Locking in on the lowest available interest rates will be in favor. I think we will continue to tick upwards in pricing over the next few months, but at a significantly slower pace than what has occurred. As I've said… right now, the demand is high, and the inventory is low. Until one of the two changes noticeably, the current trend will continue.
The only question is, when will we notice the shift?
Real estate is still a safer bet than other investment options. If you're looking for a shorter-term investment, you may discover the pinch of a shift. You may end up selling for less or at a loss, but you'll also pay less for the next house, balancing the scale and potentially placing you in a more favorable position (lower property taxes and lower payments). Buyers that are planning long-term—you'll be fine. Even during the 2007 housing crisis… those that rode the storm and made it through to the other side eventually found their profits back (and gains). The key is to prepare. Get your savings in order if you know the storm is potentially on the horizon. Having 6-12 months of house payments in the bank will allow most people to ride any storm of life. Plan accordingly. If I'm wrong, well…having plumped up savings never hurt anyone. I can help you find an investment property to utilize your savings as a down payment. Invest, save, prepare by increasing monetary savings, and then set sail.
What are your thoughts on the market? Are you afraid, or are your holding out? What are your goals? How can I be of assistance?
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. 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, but I've also 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.
If you're ready to buy or sell, I'm prepared to make it happen. 435-773-3751
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