How the Salt Lake Real Estate market Got Hot

I remember my first few years selling real estate here in the Salt Lake area. It was a good market back in the mid 1990’s with a lot of people moving in from out of state and the market appreciating well. We would list a property and do some good marketing and the average days on market was around 45- 60 days, which suited my sellers fine.

Once a home went under contract we would schedule an appraisal and then didn’t even think about it again because the appraisal always came in fine. Not even once did I even consider that an appraisal would be anything less than what the sales price was.

So I left the state to work in Colorado and then went to California and about five or six years ago I came back to Salt Lake and the market was totally different. It was slower and homes were taking longer to sell.

Then, about four years ago or so when Utah was ranking as one of the worst states in the nation for foreclosure rates the state decided they needed to do something to slow down these foreclosures. Well, they couldn’t tell home sellers what to price their home at and they couldn’t tell Realtors how much they could list a home for, so the only control they had was with the appraisers. So they started fining and suspending appraisers and taking away licenses and in a few years the numbers of appraisers in the are went from over 2000 to less than 900. And the appraisers were all so worried about audits and getting in trouble that they wouldn’t appraise anything anymore.

You could have three homes in your area sell for $200,000 and one sell for $201,000 and one more sell for $203,000 and try to sell a home that was upgraded to the hilt with granite and stainless steel appliances and new windows and a new roof and upgraded hardwood floors and put it on the market for $215,000 and you would get an offer for $215,000 and the appraisal would come in at $203,000. So we would call the appraiser and explain about all the upgrades but the appraiser still woudln’t change their value because they were scared. So the Salt Lake market didn’t appreciate for years. For a few years the market was just flat because no matter how much a buyer and seller were willing to negotiate- the appraisers wouldn’t come in with a value that was more than what had already sold.

Then, finally, last March or so some news channel broke a story about how the Salt Lake market was the most undervalued market in America. And then another story followed and then another and pretty soon we had a bunch of investors and people from out of state buying property here in the area. And the best part was that many were paying cash. They would sell their home in California for over a $Million and take their $500,000 and buy a home twice the size for cash. So the appraisers didn’t have any say in it. The sellers could sell and actually see some appreciation, the buyers could buy the home they wanted, and everyone would win. And the market started to appreciate.

Now the market is hot and homes are selling, but it’s a very healthy, steady appreciation (around 14-18% in most areas) and it’s fueled by job growth and people moving into the area, not just investors, so it should stay healthy for a while. Even with the market appreciating the appraisers are doing their best to be conservative, which can be tough for everyone else. It sure is nice when we get cash buyers who care more about getting a good home at a fair price then they do about one person’s opinion.

When appraisers sell their own homes hopefully they realize how frustrating it can be when some stranger decides to choose certain homes for comps and not other homes and the value comes in low. At least I hope they feel that so they can appreciate what everyone else has to go through…


3 thoughts on “How the Salt Lake Real Estate market Got Hot

  1. Pingback: The Battle Between Appraisers and Everyone Else « Blog

  2. Greg,

    First of all, who is “they”?
    Second, the reason for foreclosures four years ago is due to economics 101, as you say: People bought high and then the market went flat. Also, people took out second mortgages to fund new businesses, recreational equipment, etc. Many of the families who foreclose do so becuase of unemployment (big layoffs four years ago in this state) medical costs, and living beyond what they can afford.

    So, with this combined, appraisers get caught in the middle when sellers want to sell, agents and lenders want the deal to happen and the pressure sits in. Anyone facing foreclosure of course would like their home to appraise enough to pay off and firts and a second. And then guess who pays the price? Everyone in Utah because our credit lending rating goes down and fewer people can qualify for conventional and FHA loans.

    There was also a problem during this period with fraud, double contracts,etc. So don’t put this on the appraisers. The same problem is occuring in Colorado right now, since everyone bought high, took out seconds, ARMs, interest only loans and now want to cash out.

    Bad combination.

  3. Pingback: Utah Housing Market Among Nations Best « Blog

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