The Bald Eagle was recently removed from the endangered species list, a notable achievement for those of us who remember the days of the pesticide DDT. But Salt Lake County real estate agents are finding buyers endangered too and the culprit is not as easy to directly link as the eagle’s chemical nemesis.
On July 6, 2007 the WFRMLS showed 5,913 active listings. That’s up over 1,500 from March 20, 2007. Last year there were around 4,700 active listings in July. What’s startling is the fact that the number of June sales was only 1,307. That’s 624 fewer closings than the June 2006 number of 1,931. February, March, April and May had noticeably lower sales as well. More inventory and fewer closings puts what we’ve all been noticing this year into perspective. It’s become a buyer’s market.
The cause of this market change is as hard to pinpoint as the cause of the Bald Eagle’s soft eggshells. Some of the disparity can be discounted as a result of a trick employed by many real estate agents. After 90 days most agents will withdraw a listing only to have it appear again a couple of days later. This will then show both on the MLS and statistically as a new listing. Most agents narrow their searches to those listed within the last 30 days. If a property is listed for a long time, savvy buyers are suspicious, and might question the pricing or the quality of the listing. Current statistics have been somewhat skewed as a result, but the fact that agents have to employ this trick indicates something is wrong.
Interest rates are one of the culprits. People are quick to get spoiled. Rates below 6 percent, although historically rare, are today’s expectation. Now that rates are hovering around 6 5/8 percent, buyers have become hesitant. Two sizeable markets have also dried. Sub-prime and no-document loans have all but evaporated leaving those with marginal credit out of the buying market. What’s more, price stabilization has all but eliminated the investor market.
But the DDT of this story is the national press’ coverage of the housing bubble. Although national conditions have little bearing on the Salt Lake County market (like politics, all real estate is local), buyers have suddenly gotten shy. Certainly the greed factor encouraged by rapid appreciation is gone. Some even think prices here will drop. However, given the parity between the Salt Lake County market and surrounding metropolitan areas, our influx of outsiders, and our strong economy, that is highly unlikely.
Three markets will remain strong. The first is the entry-level market. Condos priced around $150,000 still have plenty of demand. Single family housing below $300,000 should also continue to thrive. There is still plenty of local demand and the economy here is one of the strongest in the nation. First-time buyers are looking to get away from the highest rents we’ve ever seen. The third market is homes with unique appeal. People are buying homes as places to actually live in again, not just as investments. However these homes will stay on the market longer.
It will take a few months for buyers to make a comeback. The Fed is looking to provide a remedy for the ailing housing market so interest rates should remain stable or even drop slightly and all indicators point to a continued aggressive Salt Lake County economy. As more workers from other higher-priced markets enter the Salt Lake area, the number of new home buyers should also grow.
So with a little care and patience the number of buyers should eventually rebound. I’ll let you know when, like the Bald Eagle, we can confidently remove buyers from the housing market’s endangered species list.
Gary B. Howard
