There is good news, and there is bad news, right now it’s a mixture of both in Salt Lake City.
First, the bad news: AllPro Realty, one of Salt Lake City’s big brokerages, has gone out of business. Bankrupt. Kaput. Gone. They left many Realtors broke by not paying them the commissions they have due. And to add insult to injury, it appears they have used the money owed to others to open-up under a different name with the owner of AllPro Realty’s son-in-law being listed as the primary broker of the new company. Very unethical.
In the good news category: Sales of existing homes in Salt Lake City and Salt Lake County was up 13% in September. The overall reason why isn’t clear yet, but some of it may have to do with FHA’s announcement that one October 1, 2008 they would stop allowing certain types of down payment assistance like Nehemiah.
I still hold that FHA’s data is flawed and that the rate of foreclosures amongst those receiving seller-assisted down payment is no different than those that received family-assisted down payment, but we still having non-real estate people making real estate policy in Washington. We have rich politicians who don’t have any issues making a down payment on a new home making policy for those that don’t make as much money as they do: Joe Mainstreet. Or more to the point right now: Joe Plumber who only makes $40,000 a year or so.
But off my soap box and back to the subject at hand. Sales are up. Hopefully it’s a trend that will continue with just an occasional stumble.
The trade-off has been that prices are down. The average price of a home in Salt Lake County has fallen 9.46% over the past 12 months from $243,000 to $220,000. Why? Here’s my thinking. First and foremost, home prices in Salt Lake City increased around 55% from 2003 to 2007, I feel driven by the availability of Stated Income loans that were used to buy more house than someone would qualify for via a Full Doc loan. This allows sellers to ask more and buyers to bid against each other, artificially increasing the value of homes. And what is the value of a home? Whatever someone will pay for it. The kicker is Utahn’s incomes did not increase by an equal amount.
Now with the elimination of almost all Stated Income loan products, more Utahns are qualifying for less home. But more realistic in relationship to their income and what they can afford. This is bringing home prices back into a realistic range. You see, the average household in Salt Lake County makes about $60,000 a year, which qualifies them for a $211,000 loan. So I think we’re seeing average home prices sink back to the range of the average Utahn’s documentable income.
Second, although Utah hasn’t been hit by the foreclosure problems that other states have, there has been some, and homes selling at auction below market value, or homes being short-sold to sell them before they go to auction is driving down values since a major indicator of appraised value is comparable sales within a given area around the property being appraised.
For those that document their income the market is very good, and it’s a very good time to buy. Rates are still historically low and homes have become more realistically valued for the area, and contrary to what you hear on the news banks are still funding loans. Wall Street is hurting, but Main Street is a bit more insulated because not everyone on Main Street is a rich investor in the Stocks and Bonds markets.
If you or anyone you know has any questions on their current mortgage, please contact me. I’m always happy to answer them.