Everyone wants a deal.
When purchasing something we tend to be rational economic decision makers.
When we sell, we want the most we can receive.
When we buy, we want more for less.
It has always been like this and we live in a time that rewards this way of thinking.
So, naturally, those who want to list want to make sure they do so at the right time to maximize their gain.
And buyers want bargains.
Utah home prices have been going up, up and away.
Buyers are asking me if the prices are going to fall... and if so, when.
I have no crystal ball, but there are some indicators that sellers might soon feel pressure.
Here are a few indicators (Utah specific):
1. The snow will start to fall
For some reason prices can begin to fall as the temperature dips. Why? I don't know. It could be because summer is more pleasant for home shopping. People want to get out of their current place and into a new one before school starts. They don't want to move during slopping cold weather. The holidays are booked tight and money is tighter. It could be any of these reasons or all of them to a varying degree. I can't guarantee it, but prices might head slightly south as the temperature drops.
2. The inventory begins to swell
This is not true for all Utah locations, but homes in some neighborhoods are starting to sit longer than before. If one home sits and another home hits the inventory- they begin to compete against each other. When homes "fly off the shelf", this is not a problem because home scarcity still exists. The longer homes sit on market while others join them there is an obvious outcome: those who wish to sell will probably accept a lower price. So, as days on market increase, the prices will start to drop.
3. Income vs Inflation
Home prices have been going up. Income has also been going up. The problem is, income is not going up as fast as home prices. When the average income of the people in a location is below the affordability level of the homes in the market, something has to give. Either employers will need to raise wages in order to keep their people or people will need to spend less on non-essentials. Also, home sellers will need to lower their prices because there are fewer people willing to pay for a house that’s out of the budget. I am seeing price drops among some sellers and new home builders. It's not a huge price drop- but there are some indications that we could see housing prices stall. I’m also seeing appraisals start to fall in certain areas.
4. The Affordable vs the Extravagant
Affordable housing is now very hard to find... so much so that the Salt Lake City council is concerned that we may be in for a wakeup call. With rising rents and home prices, the affordable side of the market is tight. I don't see prices falling on the lower end. I do feel that the higher end may be pressured on pricing before the lower end does. So far, Utah has an extremely low foreclosure rate. If affordability issues remain uncorrected, this could change.
Utah's unemployment level is very low. While the economy remains strong- pricing will not fall much, if at all. Should this change, or wages remain stagnant- we'll see prices start to move downward. I don’t see immediate storm clouds, but if the economy inches south- it will catch up with Utah as well.
So. What do I do?
If you want to sell, just know that you may not sell as quickly or for as much as you had hoped. I will do what is needed to best market your home but we’re starting to see the first indicators of a slowdown as inventories begin to rise in some areas.
If you are buying, don't be too concerned about squeezing every penny. We can't expect that the home you saw this morning will be available tomorrow. Homes that are priced to sell are still moving rather quickly. So, be prepared to act when you see the home that fits your needs. We aren't able to bargain just yet. It still is a sellers’ market and anyone who has sat on the fence for the past few years has seen that the prices have been climbing. Fortunately, interest rates are still very low and some of the borrowing requirements have relaxed. There are people who may think they can’t afford a home that will be pleasantly surprised that they can own for less than what they pay in rent. Let’s talk to a lender and see what you’re able to afford.
Finally- everything is local. Some neighborhoods are at peak pricing and others are on the decline. Let's discuss your buying or selling needs and chart the best course of action.
I think it's a great time to buy or sell.
There is a leveling off occurring, which makes the process easier to navigate. We are approaching a more normal housing market- which makes it easier than it has been to be able to think rationally.
Photo Credit "It Begins!" by the very talented mckinney75402