Ogden House Prices: Up? Down? Where to from here?

It has been about a year since I last nerded-out on everyone and cranked out some house price charts.  Although, many of you know I have had plenty of opportunity to nerd-out on other topics.  In any case, I thought it was a good time to take a look back at the year and get a feel for the dirction of house prices in Weber County.  So, without further delay, here are the charts for your visual enjoyment:

The first chart shows Weber County house prices indexed over time.  It takes real estate worth $100,000 in 1979 and shows what its value would be based on changes in Ogden's house price index (red line).  It also shows what $100,000 of real estate in 1979 would be worth today when adjusted for inflation (blue line).  Not surprisingly, the the 'real' value of real estate moves sideways.  As incomes go up, the price of milk goes up, and house prices go up.  As it turns out, there is a natural balance and proportion between people's incomes and house prices.  Variations in this relationship reflect economic distortions like non-amortizing interest-only loans, mass layoffs, or other factors that take the market some time to absorb and correct for.

Our next chart is a close up of the previous chart and zooms in on the last 14 years to show sticker prices on homes.  Can you spot the bubble in this trend line?  As you can see, we have just overcome one major run up and blow off of market value.  The last two years have been marked by an increase in house prices as low interest rates and market sentiment have combined to return the market to relative equilibrium.    

But, lets zoom in on the inflation adjusted house prices over the same period.  As you can see, the bubble is very obvious here too.  But, when house prices declined, they fell below the long term trend and over corrected.  Since late 2012, house prices have been climbing back toward their long term trend lines and restoring the natural balance between household income and house price.

These charts show data from October.  My hunch is that we have reached that "sweet spot" where there is balance in house prices.  Any appreciation we see will be tied to income inflation.  Inversely, any declines in house prices we see will be related to job losses or an economic recession.  Nevertheless, any decline we see should not be nearly as catastrophic as the housing depression we have just survived.

Look for a more stable market for buyers and sellers for the time being.  If you are in the market for property, CONTACT ME, and lets discuss your real estate needs.