I have always encouraged my clients to be responsible landlords. The city is now giving unlicensed landlords a reason to be responsible. Starting today, the city will be fining unlicensed landlords $314 per unit for each year they have been unlicensed. Of course, this comes after a 3 month grace period the landlords have been given to get into compliance. This is another step in the right direction for cleaning up unscrupulous slumlords.
I suggest that any landlord in Ogden participate in the Good Landlord Program. Its great training for any property manager and get you great discounts on fees. I participate and its been great to me.
Thursday, March 27, 2008
FrontRunner Opening Eminent
UTA announced yesterday that FrontRunner will begin service from SLC to Pleasant View starting April 26th. This is probably the most under-hyped story of Utah's real estate scene.
The implications for FrontRunner are huge. It will be a drain to the SLC market as homeowners seek lower house payments and head north. The rail will provide a faster and more passive commuting experience which should be very attractive to those with office jobs in Downtown SLC.
I expect many folks from the Holladay/Sugarhouse areas and also folks with the sensibility to live in the Avenues to gravitate toward Ogden's vintage housing stock. All of Ogden's Historic housing is less than a mile from the Downtown hub.
Let the immigration begin.
The implications for FrontRunner are huge. It will be a drain to the SLC market as homeowners seek lower house payments and head north. The rail will provide a faster and more passive commuting experience which should be very attractive to those with office jobs in Downtown SLC.
I expect many folks from the Holladay/Sugarhouse areas and also folks with the sensibility to live in the Avenues to gravitate toward Ogden's vintage housing stock. All of Ogden's Historic housing is less than a mile from the Downtown hub.
Let the immigration begin.
Tuesday, March 11, 2008
Market Volume - The Last 12 Years
There has been some discussion recently about the number of sales occurring in our marketplace. To shed some light on this topic, I thought I would share a chart showing what sales volume has actually been for Weber County for the last 12 years. This data comes from the WFRMLS.
There are several points I would like to make about this chart that I find interesting:
1. Notice that there was a consistent and steady trend upward in the 12-month moving average from 1995 to 2003. You might remember that Utah was in recession around 2000-2001 and despite this, sales volume continued to trek upwards. It's also interesting to notice that sales volume went virtually unchanged even though prices decreased during this same period.
2. In 2003 there is a dramatic upward shift in the volume trend. This growth is consistent all the way through July 2007. So what happened to cause this sudden shift? Answer: Interest Rates. The FED in 2003 dropped interest rates to all time lows in an effort to prop up the economy. This propping effort shot tons of credit into the housing market. Owning a home became affordable for almost anyone with a pulse....for a while. Another interesting factoid is that prices during 2003 did not increase. It wasnt until 2004 that Utah saw its first significant appreciation since the last spat of increased value. Even though volumes were markedly higher in 2003, it took a whole year of frenzied buying before values started to be pushed upwards.
3. In July 2007, the market took a sudden turn downward. The combined effects of the normal seasonal cycle and the tightening of lender guidelines pushed sales volume to lows not seen since 2002/2003. These are levels that were seen prior to the loose lending surge of the last four years.
Observations 1 and 2 go to the point that Price is governed by local economic health and access to jobs and wages while Sales Volume is governed by a seasonal cycle and availablility of credit. I think that is pretty well understood by everyone.
Observation 3 is of a significant shift which has huge implications for the Realtor sales force out there. Realtors work on commission, they get paid on a per-transaction basis. Normally, as the market expands and there are more transactions to service, the Realtor population increases to handle the demand. That Realtor population increase has been happening since 2003 in earnest.
The situation now is equivalent to a heard of elk on the range in a brutal cold winter. The weak and old elk always die off while the healthy ones atrophy and struggle on for survival. When spring arrives, the survivors flourish. With such a large population of Realtors and a now much smaller transaction base to feed them, the weak and inviable agents are leaving the workforce. The dramatic part of this is that in order for there to be equilibrium almost half the agent force will need to be wiped out. Its going on right now. Hopefully it will be swift. One thing is for sure: With the excess being wiped out, the professionals in our industry can get back to work in a prosperous way.
There are several points I would like to make about this chart that I find interesting:
1. Notice that there was a consistent and steady trend upward in the 12-month moving average from 1995 to 2003. You might remember that Utah was in recession around 2000-2001 and despite this, sales volume continued to trek upwards. It's also interesting to notice that sales volume went virtually unchanged even though prices decreased during this same period.
2. In 2003 there is a dramatic upward shift in the volume trend. This growth is consistent all the way through July 2007. So what happened to cause this sudden shift? Answer: Interest Rates. The FED in 2003 dropped interest rates to all time lows in an effort to prop up the economy. This propping effort shot tons of credit into the housing market. Owning a home became affordable for almost anyone with a pulse....for a while. Another interesting factoid is that prices during 2003 did not increase. It wasnt until 2004 that Utah saw its first significant appreciation since the last spat of increased value. Even though volumes were markedly higher in 2003, it took a whole year of frenzied buying before values started to be pushed upwards.
3. In July 2007, the market took a sudden turn downward. The combined effects of the normal seasonal cycle and the tightening of lender guidelines pushed sales volume to lows not seen since 2002/2003. These are levels that were seen prior to the loose lending surge of the last four years.
Observations 1 and 2 go to the point that Price is governed by local economic health and access to jobs and wages while Sales Volume is governed by a seasonal cycle and availablility of credit. I think that is pretty well understood by everyone.
Observation 3 is of a significant shift which has huge implications for the Realtor sales force out there. Realtors work on commission, they get paid on a per-transaction basis. Normally, as the market expands and there are more transactions to service, the Realtor population increases to handle the demand. That Realtor population increase has been happening since 2003 in earnest.
The situation now is equivalent to a heard of elk on the range in a brutal cold winter. The weak and old elk always die off while the healthy ones atrophy and struggle on for survival. When spring arrives, the survivors flourish. With such a large population of Realtors and a now much smaller transaction base to feed them, the weak and inviable agents are leaving the workforce. The dramatic part of this is that in order for there to be equilibrium almost half the agent force will need to be wiped out. Its going on right now. Hopefully it will be swift. One thing is for sure: With the excess being wiped out, the professionals in our industry can get back to work in a prosperous way.
Monday, March 10, 2008
Stanford Lecture
Great video. For those of you with an extra hour. Learn from the best.
http://siepr.stanford.edu/news/Summersfull.wmv
http://siepr.stanford.edu/news/Summersfull.wmv
Friday, March 7, 2008
HUD Boosts Loan Caps
For those watching government reaction to the credit crunch, new guidelines have been published with FHA's new loan caps and GSE's new Jumbo caps.
Follow this link (hat tip to Craig Whiting): HUD CAPS BY COUNTY
Note: Weber County's FHA loan cap was 200K and is now 270K! That opens a lot of doors to buyers.
There is a temporary 1-year window that these larger loans are available. Take advantage while you can.
Follow this link (hat tip to Craig Whiting): HUD CAPS BY COUNTY
Note: Weber County's FHA loan cap was 200K and is now 270K! That opens a lot of doors to buyers.
There is a temporary 1-year window that these larger loans are available. Take advantage while you can.
Thursday, March 6, 2008
Real Estate Prices Headed Down? Think Again.
I sent an email out today. Here is a valuable excerpt:
We continue to see a steady drumbeat of bad news on the national level. Historically the price volatility that the East and West Coast markets are seeing is not unusual. What is unusual is the speed in which these markets are adjusting to reality.
We continue to see a steady drumbeat of bad news on the national level. Historically the price volatility that the East and West Coast markets are seeing is not unusual. What is unusual is the speed in which these markets are adjusting to reality.
The Utah Real Estate market does not behave like these markets for several reasons:
1. Demographically the SLC area represents America from the 1950's. Large child producing families are less mobile.
2. Persistent in-migration and slow out-migration creates demand for housing even in a recessionary environment.
3. Geographic constraints place definite restrictions on supply. Water is only available for residential development and use in limited areas of Utah. Namely the Wasatch Front. More people will continue to be squeezed between the lake and the mountains. Eagle Mountain is the only community that I can think of that defies this trend.
So does this mean that our market is some how immune to downturns? No it does not. But what it means is that we have price stability that other places that we hear about on a daily basis do not. I have attached a chart I created based on OFHEO data showing what $1 of Real Estate has done in Utah since 1986. If you bought your home in 1986, email me and tell me if this chart is wrong. I suspect it is pretty close to accurate.
The interesting thing to notice is that very seldom does the market actually decline in value. There were small periods from '87-'90 and '00-01 that were down but they were never very deep declines. Maybe 5% at most but really being flat until the next boom.
We are entering another one of these flat periods where values are steady. If you bought your home in the last 12 months plan on being there for another 3 to 4 years before you have enough equity to move to your next home. For those who have been in their homes over 2 years, you have plenty of opportunity to sell your home and transition to your next property.
Look forward to very slow increases in prices over the next few years. Its during this period that buying real estate will be the most rewarding.
Look forward to very slow increases in prices over the next few years. Its during this period that buying real estate will be the most rewarding.
Wednesday, March 5, 2008
Junction Construction Schedule
Recent news about Midtown's financing problem with the proposed 14-story hotel/waterpark facility to be located at 23rd and Washington Ave. may be a sign of things to come in the near future. According to recent articles (see http://globaleconomicanalysis.blogspot.com/2008/03/commercial-slowdown-disaster-for-jobs.html)
The ramp up and completion process for the Junction project may be stretched out over a longer period of time due to the financing constraints. This has nothing to do with the project itself, rather it is a problem facing every commercial developer lately.
What this slowdown in financing does is lengthen the time that the window of opportunity is open to invest at a reasonable value in Ogden. I believe that once the project is completed there will be a significant runup in value in the surrounding area. So I would encourage more investment in residential real estate as financing for such is avialable.
The ramp up and completion process for the Junction project may be stretched out over a longer period of time due to the financing constraints. This has nothing to do with the project itself, rather it is a problem facing every commercial developer lately.
What this slowdown in financing does is lengthen the time that the window of opportunity is open to invest at a reasonable value in Ogden. I believe that once the project is completed there will be a significant runup in value in the surrounding area. So I would encourage more investment in residential real estate as financing for such is avialable.
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