Wednesday, June 24, 2009

Utah Market: Steady As She Goes

A colleague called me today looking for data on market fundamentals. He had a hunch that prices are not dropping as much as buyers think they are. His hunch is correct.

Lets take a look:

This first chart shows appreciation rates along the Wasatch Front. Data here comes from OFHEO (now FHFA) with Q1 2009 being the most recently reported statistics. What this chart shows you is DIRECTION of price, not price itself. This chart shows that after price increases for over 8 years on a row, we have given a little back.

How much have we given back? Lets take a look:

This composite chart shows you price movement. This is what most people are interested in seeing. As you can tell from our graph, prices have given up just a small fraction of thier maximum value that peaked in 2007. Keep in mind that this is an index for all properties, distressed (wholesale) and everyone else (retail).

This chart demonstrates that buying and holding is always a winning strategy in the long term in Utah. The last time we saw price depreciation was in 2000. If you bought at the peak in 1999, you would have had to wait till 2002 to break even again. So, if you are in the real estate game to win, which I am, then you need to follow this chart below.

This chart shows the Utah market cycle in general. We are on our way from phase 2 to phase 3. Wholesale prices (composed of REO, Short sale, and other distressed proprety) are in the red. Retail prices (everyone else) is in the black. We will likely see a troughing of wholesale prices sometime in 2010. Meanwhile, composite prices (retail and wholesale mixed together) have only softened slightly as scene in the above charts. It might be reasonable to suggest that the decrease in composite prices is due to the wholesale component declining rather than all of retail prices declining. You make money in the marketplace differently depending on which phase you are in. Fortunately, phase 3 is where the easiest and safest money can be made.

I hope this information helps you understand the marketplace. You can make money in any part of the cycle, you just need to know WHAT to do. If you want to know what that is, give me a call and I will show you.

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