Selling prices are down, but expected to recover
October 21, 2008
There’s good news, and there’s bad news for local real estate.
The good news is that the inter-bank lending that has been frozen for the past weeks will unthaw soon, according to Sandy Baruah acting administrator for the U.S. Small Business Administration.
Baruah was in Midway yesterday explaining the specifics of the Emergency Economic Stabilization Act of 2008, or the "bailout" as it’s known.
He said in a telephone interview that he believes recovery has been slow in coming because the money has not yet been infused into the system and the toxic debt hasn’t been bought by the government yet. As soon as it is, the signs are already showing that recovery will be on its way.
For one, he emphasized, the interest rate is low. That’s not the problem. Availability of money is the problem, and the government will be providing that, he said.
The Small Business Administration is also promoting a rural lending initiative to make its assets easier to access for rural banks to keep development in places like Wasatch and Summit counties going.
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The bad news is that recovery won’t be overnight, he said.
"We didn’t get into this situation over night The crisis developed rapidly, but it wasn’t caused overnight. We won’t get over it overnight," he said.
The good news is that home values seem to be holding steady, said Steve Martin, senior appraiser for Summit County.
His numbers are all from 2007, but his read of 2008 is that the market is staying consistent. What homes are selling, are mostly holding their value.
The bad news is that so few homes are selling, it’s really hard to tell, he said. Also, that means taxes will likely stay the same, even if people think their homes are losing market value.
"There’s a lot of perception of people crying doom, doom, doom, but in Salt Lake, Davis and Weber some home sales are going up Park City is holding its own," he said.
Some good and bad news that Realtor Ron Wilstein with ReMax agrees with Martin about is that homes are still selling, but only if the owners are willing to lower their prices. Also, because many buyers come from out of state, the national economy has more of an impact on Park City sales than real estate elsewhere in Utah.
Wilstein believes about 90 percent of homes on the market right now are probably over-priced. The other 10 percent are selling because they study what price the last comparable home went for, and price theirs the same or even a little below.
"It’s not necessarily good news, but it’s what they should know. It’s not terrible, but it’s not a rising market," he said. "If you’re a property owner, you might not like it, but there’s not much you can do about it."
That said, he’s seen home values in the city hold their value, and in some neighborhoods even climb slightly.
Realtor William Winstead of Prudential has seen the same thing with houses. A lot of buyers are looking for a primary residence and they’re getting the loans to buy. The bad news, however, is that if they’re looking for a second, or even third home, they want a good deal and are waiting for prices to come down. If owners listing aren’t willing to come down, the freeze will continue.
More bad news is that the freeze is a statistical reality, said Realtor Jess Reid. Looking at sales figures, Reid said volume is down about 40 percent. Also, as Wilstein predicted, overall selling prices are also down about 5 percent.
But with all that bad news, Reid also predicts the area to finish the year with about $1 billion in real estate sales. He wrote in a newsletter that the demand for homes in Park City is so high he expects a quick recovery for the area after the government bailout takes effect and a new president re-inspires confidence.
"The big question is: when are we going to start coming out of this? That’s difficult to answer. But people are still buying," he said.
Martin reminds people that the area has seen ups and downs like this numerous times over the past 20 years. The most recent was a slump after Sept. 11, 2001, which completely recovered by 2004. The success of those few years slowed in late 2007, and we’re still in that slump now.
Reid remembers the recession of the late 1980s when interest rates for new mortgages were the same as credit card rates today. Today, it’s nowhere near as bad as that, and he said those experiences taught him to be conservative and wait out the slumps.
Baruah said he warns people not to watch the stock market for a "daily report card" on how the economy is doing.
"I think evidence shows the plan is working," he said.
The current crisis is affecting people at the local level because the banks aren’t lending to one another, he said. But with the government soon providing that money and buying out or insuring against risk, there’s no reason for them not to, and business development will again resume.
At a time when financial institutions are looking to reduce risk, SBA has exactly the funding programs they’re looking for, he said.
Once the plan starts taking effect, he said, "we’ll be slowly working our way out of this."