Things I Like About the Current Market

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The current market in Salt Lake is this;

Lots of inventory, some people are watching to see what’s going on, lenders are beginning to realize they don’t have to completely shut down all loans to stay profitable, and lots of people are buying and selling houses still.

Still, regardless of the good and bad and everything- there are hundreds of people buying and selling homes every week in Salt lake county. And of course hundreds more are being bought and sold in surrounding counties as well.

Here are some of the things I like about the current market…

Everyone I talk to is not an “investor”. It drove me crazy the last couple years that everyone I spoke to claimed to be a real estate investor. Whether they had purchased rentals or flipped any houses or not- they all fancied themselves as an investor because they all wanted to be one. And they all thought they knew everything about real estate. They didn’t, they still don’t and now they can finally shut up and go back to being accountants and store clerks and fireman and whatever else they do for a career. They can let the real estate professionals be real estate professionals.

Far fewer For Sale By Owner’s. Not that there is anything wrong with trying to sell your house without an agent, but many of these people (because the market was so hot) were just a bit mean about their views toward agents. Some people will always be mean about agents, just as some people hate attorneys or think paying someone to change your oil is a waste of money. That’s just human nature- there will always be the fringe minority that has opposing views toward any given thing. Now that sellers need more help selling it’s nice for agents to be wanted more. We mostly work with buyers anyway.

Buyers market= Good for buyers. Most of our clients are buyers so this market is great for our clients. There is a great selection of homes on the market, interest rates are fantastic, prices are reasonable, and indicators show it’s a good time to buy and that prices will continue to increase so buying will be a solid investment. Sellers are still getting good prices for their homes and buyers are getting to choose from more inventory.

Many agents are leaving the industry. This is great news for everyone. Many of the part-time and new agents are leaving, which means they won’t be around to hurt any clients and give the real professionals a bad name. There are simply too many people in the business- real estate agents, lenders, title people, etc. This should be a great time to trim some of the fat from the business and allow the best to do their business. Of course there will still be far too many in the industry next year and the year after, but that’s just how it is. Many people who have gotten into the business the last few years really never should have. They chased dreams of riches and easy money and now many are seeing that this business is about clients and working your butt off for those clients. It’s working every day of the week, not being able to take vacations because your clients need you, stressing about deals, dealing with ungrateful people sometimes and rude people on the other side of the transaction that you have to deal with for the sake of the client’s best interest. It’s late nights and a lot of humility, starting out in this business and it’s not for everyone- in fact over 90% of the people who get a license- fail.

Two people can see the same experience very differently. A basketball goes into the basket as the clock ticks to zero- One team screams with excitement as they win and the other team sobs about their loss. A ball went into a basket, but different people feel very differently about that. Many people don’t like this market, but many people do- including me.

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24 thoughts on “Things I Like About the Current Market

  1. Hey Greg,
    I have been following your blog after John Harper clued me in that it was YOU! Congrats on the great job you are doing. I look forward to the next time we run into each other. Enjoy your day!

  2. Pingback: The Odysseus Medal competition — Voting for the People’s Choice Award is open | BloodhoundBlog: Real estate marketing and technology blog | Realtors and real estate, mortgages, lending, investments

  3. Thank you for posting something positive. The negative press is everywhere and I am confident negative press affects the market. It will be interesting to see what the market really does.

  4. Bill,

    There is no conflict in my interest. I work with more buyers than sellers, so having the market be a “Buyer’s Market” is good for my buyers-

    Where’s the conflict?

    If you think the market is “headed down” than you obviously don’t know the market- when our market slows down it means prices aren’t going up as fast, not that prices are actually coming down.

    As of the end of the second quarter (the last quarter released), which means up to the end of June, Salt Lake not only is strong, but is number one in the entire country for appreciation at over 14% for the year.

    The market is more of a buyers market now, but why is that a bad thing? For buyers it’s great.

    Here’s the chart showing the appreciation rates- it’s from the Salt Lake Tribune, not me.

    http://extras.mnginteractive.com/live/media/site297/2007/0721/20070721_015735_Ut%20Average%20Home%20072107.pdf

  5. Dear Greg,

    I had to chuckle when I read your response. Let’s start with the conflict of interest. First of all, I don’t care who you say you work for, your goal is to sell houses. People do not buy a house when they think the price will be cheaper in the future. If people wait to purchase a home you don’t get paid. Cash flow is important. If you continue to tell people the market is strong and continuing to climb, or that it is a so called “buyers market,” they feel an urgency to get in before they loose out. The ethical problem is that you are not telling people they could get the same home for thousands less in 8 months. Either you are lying to them or lying to yourself.

    Now the analysis of the housing market since you apparently don’t know economics and believe what all the other real estate brokers in your professional circle are telling you. As to the second quarter appreciation statistics, I find it interesting that you refer to old information. The change in the market happened after the second quarter; around July. That data only helps prove my point. There were so many people buying houses during that quarter that shouldn’t have been and are now stuck in a second mortgage, anxious, or in the words of realtor, “motivated” to sell.

    Historical perspective first. I know, I know, the Utah market never really drops but just levels out. The last time there was anything that could even be considered a drop was in the Utah market was in the mid 80s. Yes, I’ve seen the data. It is bad data. There are two significant differences from the 80s. The first is the duration of the downfall in the national housing market. Utah generally lags about 1.5 to 2 years behind the nation. In the 80s when Utah’s market started to fall the national market started to rise buffering the impact in Utah. The rise national made the dip less drastic. The duration of problems in the national market is longer and more drastic this time around; even with flawed Congressional policy on foreclosure, and Bernanke bending to political influence. The second, and more impactful difference is the instruments of the mortgage market and the ability to obtain financing over the past years. Too many people making too many dumb choices about financing. Interest rate dependency, increased payments, buydowns, whatever the case may be, it was out of control.

    The inevitable. Interest rates will rise. I don’t care if the short term rates are still low, the fixed rates are going to start heading upward. Bernake has to raise the rates sometime. Inflation has to be controlled and will start making an impact sooner than later. Eight years ago, shortly after the Euro was introduced it was $1 per Euro, now it is $1.40 per Euro. The Loon (Canadian dollar) is now 1 to 1. We are starting to see the impact of inflation and the Fed will have to get the rates up before long. The fixed rates will be taking this into account. People won’t be able to afford as much having to borrow at the higher rates.

    Next, investors. There are plenty of them in the Utah market. More so than in the 80s. It doesn’t matter whether they think the market will go down, only that thier money can do better elsewhere. Many are now nervous and don’t want to be caught with the homes during the winter. They are selling increasing the inventory.

    Wages can’t sustain home prices, people in CA can’t sell homes to move here, on and on etc. etc…

    If you were really truthful with buyers, and you actually worked for them (they pay you and you are liable for breaches of fiduciary duty) you would tell buyers not to buy until next spring.

    Bill Turner CPA, Esq.

  6. Bill,

    I appreciate what you are saying but don’t agree. I’ll address a few innaccuracies in your remarks;

    You say that I am using old information when I use second quarter stats, yet as I stated before, it is the last quarter of verified information we have.

    You said, “The change in the market happened after the second quarter; around July.”
    But, in fact, the market began to change in March of this year with inventory levels rising sharply and the sub-prime mortgage market collapse in April. Since the beginning of March ’07 our active inventory levels have rising every single week until two weeks ago when they first leveled off.

    You said, “There were so many people buying houses during that quarter that shouldn’t have been and are now stuck in a second mortgage, anxious, or in the words of realtor, “motivated” to sell.” But the reality is that the sub-prime mortgage market collapsed in April and 100% stated income loans and most other sub-prime loans all went away in March and April, meaning in the second quarter most loans were scrutinized heaily (as they are today), underwriters are crunching numbers very heaily and appraisers are being very conservative. People are not, are have not since April, been buying homes without being able to prove they can make payments, through traditional ratios and qualifications.

    You said, “I know, I know, the Utah market never really drops but just levels out. The last time there was anything that could even be considered a drop was in the Utah market was in the mid 80s.” Actually the last time our market went soft was in the late 1990’s and through about 2004, when we were last in the entire nation in appreciation. Yet even then we had 2% appreciation- not a decline in prices.

    You then said, “Yes, I’ve seen the data. It is bad data.” So, now you not only disagree with me, but with the facts. You actually think that you are so wise that your knowledge is superior to fact? Look, I understand that people can pick and choose what data to show and support their arguement, but I post links to the full reports that I mention. There is no dispersing of numbers to justify my argument.

    You said, “Utah generally lags about 1.5 to 2 years behind the nation”. Utah actually lags about one to two years behind California, not the nation. There is no “national real estate market” and every area has it’s own, very different, set of indicators and influences that determine it’s real estate market. You are saying the entire nation has one market and we have another, which follows 1.5 to 2 years behind. One of the indicators we look at is California (as a whole, with each of it’s markets combined) to get a general feel. Of course CA has many local markets, so this is simply one indicator of many that we use to predict where our local market is heading.

    You said, “The inevitable. Interest rates will rise”. That’s very insightful- yes, eventually interest rates will rise. I, and probably every educated person in the world would agree, interest rates will eventually rise. I doubt they will rise above 7.5% or 7.75%, which would still be historically good interest rates. Bernanke had to lower rates to shield the stock market from people liek you who think if we aren’t breaking records then things are going to hell.

    The dollar is so low because of years of bad policy from an administration that counts it’s wins by how many friends they help out. Simply printing more money to pay millions of dollars every day on a useless war will weaken any currency, even the once- mighty dollar.

    Just so you know, there are still plenty of good loans out there right now, including a couple of 100% financing loans. The guidelines have changed and the qualifications and debt-to-income ratios are tighter, but there are still plenty of good loans for people to get financing.

    With regard to investors- indeed most are not throwing money into flipping homes in our market anymore. This is a good thing. Investors flipping homes has it’s good, like refurbishing areas and giving new life to once run-down homes and creating more good housing for people. The problem is when everybody thinks they are an investor and thousands of people begin buying one or two or ten houses to flip and values become artificially inflated because of all of them. Last year we had too many investors, but our rapid price growth was not high enough, nor sustained long enough, to inflate our market beyond it’s natural value range.

    Our market only really went through massive appreciation for a year. Last year we had 20-25% appreciation, but the rise in values in 2005 was actually a correction from our previously depressed market. From 2002-2004 we were dead-last in the country for appreciation rates because of the big meltdown we had with appraisers, caused by the state (meaning our market was becoming under-valued). In March of 2005 national media began running stories saying that Salt lake City was the most under-valued city in the nation. This was in large part due to the big appraiser blow-up we had locally a few years before that which caused our local appraisers to become uber conservative for fear of losing their licenses and kept our appreciation the lowest in the nation for years.

    So we corrected through 2005 and then appreciated throughout 2006, but our appreciation was in the 20% range, not 50% -75% per year like Phoenix, Las Vegas, Florida, and California saw. Those growth rates are far too unhealthy, mostly caused by panic-buying, investors and speculation and they cannot be sustained. Especially when they grew that fast for a few years in a row! Thos markets have to correct.

    Being truthful does not mean yelling that the sky is falling or creating fear when the reality is that the market is softer, but 1200 homes sold last month in Salt Lake county (down from last year’s record of 1400 homes sold in September), which is on par with the sales levels of 2005.

    One of the biggest challenges we have is the perception that many people, such as yourself, have about the market. Watching national news reports that talk about the “national real estate market” and how things are bad. Those reports don’t talk about how Texas is an incredible place to buy right now with prices rising or how New Jersey has appreciated over 15% this year or that Seattle has been appreciating, or that the Salt Lake market still has incredible job growth, over 30,000 people expected to move into the county this year, record-low unemployment and relatively low home prices (we are still ranked near the middle of the national index).

    As far as wages, Utah is ranked in the top ten in the country for wages- search for the report in my blog- I’ve posted about it this year. Oh, I know it’s easy to pick one post and try to impress people with your alleged knowledge of the market, but real estate isn’t a hobby for me. Just as I would not assume to tell a CPA your job, you might want to reconsider telling me mine.

  7. Can we talk for a minute about realistic pricing & sellers/buyers expectations in today’s SLC housing market?

    I see that the CPA is telling his clients that spring will be a better time to buy because prices will continue to drop, the realtor is saying now is the time to buy, not in the frenzy of the spring when other people are buying. And then there is me. A seller. Sitting here with a house which according to my agent is reasonably priced, and after a month and a half only one offer which was $40,000 below the asking price of $300k. Which we also dropped after the first week from $310k, trying to be more “realistic”.

    The agent says not to fret, that nothing is moving in our neighborhood and there is a glut (investors?) of inventory right now.

    But is an offer 15% below asking price, normal?

    We bought two years ago in September of 2005. The market had risen appreciably since January, but unless we totally overpaid for the house, I would have thought we would have been able to recoup the original investment and cost of repairs (which were considerable), even if the market had only been appreciating at a normal rate. But a $260k sale on a $300k house (assuming no additional repairs were asked for on inspection) means that after commissions are paid, we would lose money.

    Are other sellers also losing money, or only the people who bought on the upswing, like us?

    We didn’t buy the house to “flip” it. We only wanted to sell because we have a rent-free opportunity somewhere else and wanted to save a bit of money. And no, we don’t want to rent it until it is a sellers market again. Been there, done that.

    My crystal ball is not working so well these days so I am looking for other people’s insights. Some people say “Get out while you can! It’ll be worse in the spring!” Others say the opposite.

    Even with the cash in hand, I’m not so sure the stock market isn’t overdue a correction anyway so maybe I’m better off anyway with a box that rots in the rain on a tiny bit of land?

  8. I think if you are selling and buying this is a good time to move. We are selling and just accepted an offer. We are listed for sale at $430,000 and the offer is for full price with us paying $5000 for the buyers closing costs. I don’t think we would have been able to sell for more last year, we just bought the house a couple years ago for $335,000. We spent about $15,000 replacing carpets and painted the top floor and we finished one bedroom in the basement.

    But even after commission and closing costs and our remodeling costs we made over $50,000 just living there for two years. Before that I rented my whole life and have no money ever from renting. To make $50,000 just for living in a house I loved for two years I think is nothing to complain about. Some would complain they didn’t make another $5000 or $10,000 but why??

    There are lots of houses for sale right now and it’s been much more fun looking this time because there is a lot more to choose from and we are buying in a better price range with our big down payment now.

    When we listed, our agent told us we could list our house for $420,000- $440,000 so we decided to go in the middle at $430,000 so we were priced good and maybe that’s the difference. Some of the houses we have looked at are over-priced and so they will think it is the market that is bad, but really it’s there price that’s too high. The one we like most is priced good so if we buy it we will probably pay them full price, but ask for them to pay our closing costs. But we are still looking at a few more this weekend.

    Maybe you are priced too high, or maybe your neighborhood is harder to sell in or something. Or maybe you don’t have a good agent.

    Hope that helps you,

    J

  9. I think it’s up to the seller to price the home with the current market. Low offers come when a home is over-priced I think.

    We are selling our house and we just accepted an offer. We are listed for sale for $430,000 and the offer was full price but with us paying $5000 buyer closing costs. Our agent told us we could price our home between $420,000 and $440,000 and we decided to sell for in the middle at $430,000. Some people might think they were losing $10,000 but my husband and I felt that if we listed for the top of that range people would low ball us. This was our first house and we bought it for $335,000 and spent about $15,000 finishing a bedroom in the basement and painting the upstairs and replaced some carpets. But even after commission and closing fees and our remodeling costs we are going to make over $50,000 just for living in my house for two years. I rented for years and never made any money from it and now I’m making $50,000 for living here for two years? That’s my yearly income!

    And the home we are considering purchasing is priced better than we were expecting. If we buy it we’ll probably pay full price but ask the selle to pay our closing costs. If they were priced higher we would probably offer lower. Some of the houses we have seen were priced too high and some seem priced really low. We are looking at a few more this weekend. It has been a lot of fun looking this time because we can afford more now with our big down payment and there are a lot more homes to choose from than last time.

    Maybe you are priced too high or maybe you should get a better agent. I hope this helps!

  10. Let’s take a look at the math.

    Your house
    $425,000 sales price after 2 years (less closing cost discount)
    – $350,000 original purchase price (w/improvements)
    = $75,000 difference (10% appreciation per year)
    – $24,000 realty commissions at sale
    = $51,000 profit

    My house
    $300,000 asking price after 2 years
    -$250,000 original purchase price (w/improvements)
    = $50,000 difference (10% appreciation per year)
    – $18,000 realty commissions at sale
    = $32,000 profit

    We are in the same market – this is not a comparison between L.A. and SLC. The problem is not my location (Sugarhouse). This is my third transaction with the agent so I don’t think it’s the agent either, unless the agent is better at buying than selling. (I brought the buyer to the sale of my first house.)

    Is there a reason that a $350k house should appreciate more or faster than a $250k house in the same market? Or is it that a house in the lower price range is considered more of a starter home, and those buyers are now having trouble obtaining financing? Or is it that too many of these homes in this price range were snapped up by “investors” who are dumping en masse before the housing news gets worse? When I look at comparables on utahrealestate.com it certainly seems like there are a lot of vacant redos in this zipcode.

    Your comment helps in the sense that I can see that we weren’t off base with our pricing, but I still can’t figure out why the market is punishing us and continuing to reward others, and whether this is likely to continue or worsen. Are there micro-markets in SLC? (Sugarhouse buyers market, Sandy sellers market?) At what point do I resign myself to taking a beating even though others aren’t having this problem?

    The problem is also not that the house isn’t lovable either – it has been tastefully improved, all the serious problems have been fixed and it is on a quiet street.

  11. Here’s the problem Cassandra. People are only now realizing that the Utah home market is WAY overpriced. In my opinion, JL lucked out and sold to a fool. Now, with the media accurately reporting the terrible state of the market, there are just fewer fools to sell to. Fortune Magazine predicts that SLC will drop almost 25% over the next five years. If I were in your shoes, I would drop the price now, and try to get out. Five years from now you’ll be grateful for breaking even or even a $10k loss rather than holding on to the property. The problem is that even if you drop your price dramatically, people still may not buy.

  12. Davy’s right- everything’s going to hell in a hand-basket! The sky is falling and we should all just live in caves- nobody is buying and nothing is worth anything anymore!-

    Panic! Panic! Panic!

    Funny thing, how 1000 homes sold last month in Salt lake County, which is the same amount as sold in 2004, the year before our record-breaking market. Also funny, how our market has appreciated 4.3% for the third quarter year-over-year.

    That means that our market has not gone down, even though the (all-knowing) media said it would fall in the first quarter (it didn’t), the second quarter (it didn’t) and the third quarter (it didn’t) and now is saying that we will fall 25% ?!?

    Definition of insanity is doing the same thing over and over (believing the media) and expecting a different result (accuracy).

    Davy- don’t be insane…

  13. Dave it correct. Greg has to tell people it is “just leveling off.” Greg should compare 2nd to 3rd and not 3rd of last year to 3rd of this year. Even then the numbers would be inaccurrate because the change in the market happened in the middle of the 4th quarter. No one should listen to Dave. He is not at all objective. Talk to an economist. Drop your price and get out.

  14. I am using the same comparison the media is using- why is it that when the news is negative- it is being truthful, but if the news is not negative, then it must be for some ulterior motives?

    Of course the market has changed- it always does. I have posted about this in depth.

    I have posted about how much extra inventory there is right now and how it’s taking longer to sell now. That’s okay to write about, just as long as I don’t say anything positive, right?

    1000 homes sold last month, which is the same amount as we were selling before the record last couple of years- so we are back to a normal market. We aren’t breaking records every month- but homes are selling and people are buying.

    We sold ten homes last month- our websites are getting as much traffic as ever and as many buyers are contacting us as ever. And they are getting good homes right now for good prices- why is that not a good market?

    If prices aren’t rising as fast and there is a lot to choose from- isn’t that a good thing for buyers?

    Or is it better to buy when prices are rising fast again and there is little inventory?

    Good market/Bad market- that’s all subjective. If you are a buyer and it’s a “buyers market” then it’s a good market, isn’t it?

    And now the rental market will rise again, just as it always does (it goes in cycles as well). And eventually the real estate market will turn to a seller’s market again.

    This happens every few years- I’ve been through markets turning in three states and I’ve seen plenty of markets and transitions and there are always people buying and selling and there are still people making money in real estate. You think all the builders are going to get jobs at McDonalds?

    There are still builders buying land right now and starting projects. One agent told me last week he has a builder who just signed on 300 new homes to build in 2008. Our company has launched several new projects in the last month. One project that launched last week sold four homes in the first hours at their open house.

    Homes are not selling like they did last year- and yet, people will still be buying and selling homes this month, this week, today. People still want to move up or take a new job or will get divorced or they will need more room for their growing family.

    I agree- Go ahead and drop your price and get out… and buy another house.

  15. hi there can we link to each blog since we have the same blog topic real estate,

    id like to put your blog into my blogroll ..
    hope to hear from you soon . my blog is cebu real estate http://www.johnvill.com
    its a Philippine real estate focus on cebu real estate .
    give me description or title of your blog so i can link into it to my blogroll
    thanks
    john paul

  16. Ahhh, so everyone is lying? now it all makes sense. Mike are you an anarchist or just miserable?

    Nothing is as bad as the media makes it out to be. Remember they are not telling facts, they are selling newspapers/TV spots. Nothing sells like sensationalism!

  17. Bill turner and Davy were telling the truth.

    Remember, you are not telling the facts, you are selling houses. Nothing sells homes like a good market!

  18. Mike,

    This is a good market. It’s a good market for my buyer clients because they have a good inventory and prices aren’t being inflated by investors.

    My team has not slowed down at all. We are still selling 10-15 homes every month and the traffic to our websites has never been stronger- the amount of people who contact us for help buying and selling property continues to grow.

    I could say nothing and not have a blog at all and sell my 10-15 houses every month or I can continue to discuss the reality of the market (even if it’s not all negative) and continue to go about my business helping people buy and sell homes.

    Either way, my business is strong and healthy. Either way, 1000 homes sold in Salt Lake county last month- even if you put your fingers in your ears and say na na na na na na…. homes are still selling.

    Oh, and by the way- Salt Lake county was #1 in the entire country for appreciation in the first two quarters this year, and the average home price climbed again in the third quarter. Eventually we will have a quarter that doesn’t increase, I’m sure- but it hasn’t happened yet so maybe the doom-and-gloom talk would be better spent when we are not leading the entire country in appreciation (10% for the year so far!)

    The market is slower- homes are not selling as fast, and there is way too much on the market. Way way way too much… and still people need to sell houses and people still want to buy houses. I know, I know… it doesn’t make sense and these fools just don’t understand that we are in a free-fall and they should all just pack up and move into in a cave. But as strange as it is, people are buying and selling homes in every market across the country right now. In San Diego where prices have fallen dramatically- people are buying homes. In New Jersey, where prices have been going up- people are buying homes. Here in Salt Lake where prices have been going up but some people think prices have gone down- people are buying houses.

    We have too much on the market and a lot of people will lose thier homes because they can’t afford them and lenders have tightened restrictions on sub-prime loans and the media (and some blog commentors) have been saying that the sky is falling in our market all year long and will continue to say so- and still people will buy homes.

    Whether 5000 homes sell in Salt Lake county next month or 500 homes sell- I only plan on selling 10-15, and helping my clients buy good homes at fair prices. And I’ll keep posting what I see going on in the market- even if it’s not all bad.

  19. 2007 Single Family Average Sales Price – 3rd Quarter

    $310,567

    2007 Single Family Average Sales Price – 4th Quarter $286,250

    Source: WFRMLS XL Quarterly Comp Reports

  20. Those were SL County numbers. 8.5 percent drop is significant. The drop is just starting. There will be a slight bump in the spring, then the market will tank because it didn’t live up the the expectations the realtors have been selling.

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