Friday's Salt Lake Tribune (6/1/07) ran a front page article titled: "Utah's red-hot home market may not last". If you were already confused about the current market, this headline probably didn't help. The article basically said that the Utah Real Estate market is currently the hottest in the country, but that it is showing signs of cooling and will probably normalize in the coming months. All that seems to be well and good, except that the cooling has already begun and it's sellers who are getting disillusioned thinking things are still "Red Hot".
The problem with this data is that all the trends are based on the difference in price from first quarter 2006 to first quarter 2007, but that 12 month span really has two very different 6 month cycles wrapped up in it. This probably is why there seems to be the current disparity between the sellers perspective and the buyers perspective. It also may explain why so many properties on our local market begin their listings with unrealistically high prices, and why the days on market seem to be rising rapidly for many price ranges.
From a sellers perspective, all this appreciation talk bolsters confidence that they can get 10-20% more for their home than the one down the street that just sold. The 12 month rise in appreciation, 17% in Utah (statewide), 19.7% in Provo/Orem, and 19.1% in Salt Lake would seem to support this. But in reality, the appreciation rise started slowing back in August of 2006, and from September 2006 on, prices have really held very steady. Sellers today need to understand that they can't jack up their prices as if it were June of 2006. Many sellers have been hearing the news about appreciation for so long that when they strategize and set a price in their head, its already too high. And it's not to say that properties won't sell or that its now a buyers market. The climate is still very strong for sales; it's just that it's not an rapidly appreciating market, so inflated priced properties will sit. There now are plenty of choices in most price ranges, so now more than ever, effective Comparative Pricing is key to setting price. Proper pricing begins by first understanding the recent pricing trends, and helping the seller understand that although there has been great appreciation in the value of their home, it still is important to price the property to sell quickly. Todays buyer can see that there is a larger selection available and they won't overpay. So when listing homes, we all have to rein in the expectations of continuing appreciation based on a historical model that has already changed. The real indicator of the homes value is recent sold properties, and understanding where that price has gone in the last 90-180 days.
How's this relate to your market? I'd love to hear from other areas of the country.