Oil Press: Living Through the Big Squeeze

It has been some time since I updated the charts and graphs so I thought I would spend some time and do that for everyone's benefit.

The charts are a bag of mixed news.  If you are worried about your house depreciating in value, you don't have too much more to worry about.  However, if you are a Realtor, there is plenty more hand-wringing to do.

Let's talk good news first: 

The biggest question I get asked by folks is "How are home prices?"  This chart answers that question.  This data comes from FHFA and shows price appreciation year over year (per quarter) for the Weber-Davis market, the Salt Lake City market, and Utah County market.  When the line is above zero, house prices are going up, when they are below they are sinking.  As you can see, our appreciation rates exploded in 2005 and then collapsed in 2008.  It appears we have troughed out in 2010 and will come back to flat appreciation (zero) sometime in early 2011.  This is good news for home buyers and investors.  It is much easier to buy with confidence when you know your home or your investment will be worth what you paid for it moving forward.


To understand why house prices collapsed and retreated in price, lets look at our next chart:

This chart shows % unemployment in Weber County.  As you can see, there is a pretty tight correlation between people loosing their jobs and house prices decreasing.  Keep in mind that a high unemployment figure doesn't mean people are loosing their jobs, it means that have already lost them.  It's the relative change from a low to high unemployment number that affects house prices.  This chart shows that we are stabilizing at a high unemployment figure which jives with our previous chart showing that house prices are stabilizing toward neutral appreciation.

If you are an investor or a homeowner, you might be interested to see how our current downturn in the market compares to real estate values over the last 30 years:

If you purchased a home for $100,000 in 1979 (which would have been a nice home back then), that home today would be worth about $220,000.  You can see that it wasn't a straight line of appreciation that got us here but rather a series of valley's, dips, and surges that got us to this point.  With depreciation ending very soon, we will likely go through a valley period and then on to another surge sometime in the future.  NOTE:  You want to be buying investment real estate during dips and valleys (NOW) and not during surges. 

Now lets take a look at some very sobering news for Realtors:

This chart shows transaction volume, the barometer of Realtor health and wealth.  Focus your attention on the last couple of years.  The trendline shows a turn upward toward the last half of 2009.  Unfortunately, this was all artificial demand created by the Federal Tax Credit.  Real demand showed up in the last 5 months with anemic sales performance.  Our trendline is about the break below the 200 transaction per month barrier which hasn't happened since  early 1999.  Since peaking in 2006, we have wiped 12 years of sales growth off the table.  In January, I will do an update on my Starv-O-Meter for NWAOR members.  

And finally, here is a breakdown of sales per month as comparred to previous years.  As you can see, our sales peaked this year in April and quickly stagnated below 200 sales per month.  Typically sales only fall below the 200 mark during winter months like January and February.  So you could say that we are experiencing a Nuclear Winter of sorts after the Federal Tax Credit fireworks.

Adapting to survive in this marketplace is the key to success for Realtors.