Thursday, December 14, 2006

2006 in Review: Market at Large vs. St George Utah Real Estate

The Real Estate Market at Large

2006 was the year of market correction. All the signs were there, we should have known even more that with double digit appreciation gains, what goes up, did go down. The first signs started at the end of 2005. But altogether, we have not experienced a bust, even though many, especially the media was apt to point towards a bubble bursting.

Many real estate markets in the country still experienced above average sales. Yet this market has morphed into a buyers market. The decrease in sales has led to layoffs in mortgage companies and other industry participants. Investors had only encouraged other like-kind thinking- people were moving and considering it as their investment.

Nicolas Retsinas, director of Harvard University's Joint Center of Housing Studies makes a good case that while prices and the market are normalized, that it was the media and not higher interest rates that made is so, inciting an analogy of a match that is lit that becomes hard to extinguish in lieu of all the appreciation and possible mentality of a bursting bubble that was to come.

Interest rates have not really gone up all that much as compared to past cycles. However, interest rates do cast a singular variable potentate upon how home prices can get affected from here. Unconventional mortgage products widened the funnel in recent past, that added to the price increases. With the increase of supply of homes on the market, some have given thought to the idea that some of these unconventional loans contributing to supply, with perhaps setting up more consumers for foreclosure possibilities in the face of fixed rates that change to variable rates in the beginning of this next year. However, the before mentioned Restinas, cites how many appear to be compensating already by just refinancing to more conventional loans. Also Edward learner, director for the University of California, Anderson Forecast says that a lot of home owners can even still rely on an "appreciation cushion", that a profit is still in store should they decide to sell.

The overall economy is stronger than when we were in the fervor of price appreciation. Kenneth Jenny, CEO and managing partner for real estate consulting company tranCen said "The market itself has become right-sized. A right-sized market doesn't allow quick, inflationary numbers." Flippers have largely left the market taking away the frenzy that existed during the boom. Affordability is a problem in some markets, which oversupply and sagging sales will take care of that problem.

St George Utah Real Estate

The St George Real Estate market has been affected pretty similarly. As a strong place to do business, rated one of the safest places to live, one of the best places to retire, etc. St George is not projected to suffer for too long amidst perhaps a little blip that may be an ongoing experience into this next year.

Our unique situation, as well as I have been able to glean from reports through colleagues who have seemed to have had their finger on things in the past, report that just before the "word got out" about this high mountain desert, almost resort atmosphere of a town, the city had restricted or had been back-logged- anyway the housing supply or number of building permits allowed was restricted. Well, when the frenzy hit, we were not prepared with supply. Perhaps this had something to do with..., and largely from hindsight... the market had the fourth fastest appreciation rates in the country.

As a result of this most recent decline, "life-stylers", retirees, and baby-boomers , have been put up on their feet for a bit, making wise or "sage" pause toward inaction. This population group constituted a good influx of our buyers. We have experienced, maybe more than average price reductions, if not comparable to the rest of the nation at large. While many have been skeptical of buying here, the stagnation hits into our "snowbird" season too; making for an element of temporary uncertainty. But amazingly people with money- namely a few retirees and baby boomers, those who are "late bloomers" in hearing about he attraction of St George, most likely will not be kept at bay forever.

But the average "Joe" that sustains the working class, to including our teachers, policeman and city workers, have long awaited these price reductions and locals have shown a resilience in holding off the buying pattern. So houses under 250K to 300K, are likely great realms for builders to downsize to, if we are talking about "real" supply. That is your eye on the St George Ut real estate market and the market at large for 2006!

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