When the amount of sold homes goes down and inventory goes down, what happens to prices? This would be something like Economics .101 - A High School level economics question. The answer should be obvious - over time, prices will fall setting in motion a series of events which ultimately will bring inventories back in line with sales volume as the pendulum swings in the other direction. It makes sense, but, it's not what we see hapening in Utah County.  It may mean that prices will fall, but, conventional wisdom would leave me to believe that it would have already been happening. This first chart shows the decline in active listings for Utah County.  We are down almost 1000 homes since May 2007.  The decreased inventory should have created more sales.  However, it has done the opposite.

Active Listings in Utah County 2006, 2007 vs. 2008 

The second chart here shows units sold in Utah County down in 2008.
Our market has struggled most the year to be half of what it was in 2007. 

Units Sold - for Utah County 2006, 2007 vs. 2008

What Happens Next?

I am of the opinion, personally, that there is absolutely nothing that can be done to increase units sold to 2006 and 2007 levels short of reinstating subprime loans and I wouldn't wish that on anyone or any real estate market. It is one of the leading causes of why we are where we are right now.  Lower interest rates could help, but, not enough to increase sales volume back to pre-slowdown numbers. There aren't really very many variables that can change; sales volume, prices and inventory along with the local and national economy. Each of these has a subset of variables that can affect any and all of them. So which of these variables is likely to change in the near future?

Inventory?  How does inventory drop if sales volume is down?  Many home owners are giving up on the market and either staying in their homes or renting them. We are seeing this trend in our current Team Teasdale listing inventory.  It may surprise many that less homes are for sale now than we had a few months ago.

Units Sold?  Since August units sold has been in a steady decline.  The amount of homes sold will continue to drop as we head into 2009.  Lower rates will help a little but not enough.  It is too little too late.  Everyone is going to have to get use to far fewer homes selling in 2009 compared to the past years of easy loans.   

Prices?  For many of us actively selling real estate right now, it's apparent that the majority of buyers do not see value at the current prices. It is possible that prices could go down in particular sectors of our market.  I don't think the under $200k will go down any further.  The weak parts of our market is land, and homes over $400k.  These sectors may see more downward pressure.  I might add that we are seeing some incredible prices in the higher-end homes.  Many people who would sell simply do not have the equity to sell at the current prices it would take to sell there home.  Many homeowners will remain in their homes for many years longer than they had originally planned as they hope and wait for prices to return sometime in the next 5 years.

Utah County Homes have been affected less by the slowdown than many other areas, but I'm not sure that it can be sustained forever. With a local, state and national economy all in a recession and consumer confidence very low, we need either time or some yet to be seen market force enter into the equation if the market is to return to a more balanced state any earlier than 2010.


_______________________________________________________________________________________________________

Welcome to my blog!  I manage Team Teasdale of Re/max Results Realty.  We are located  in Spanish Fork, Utah.
Our group combines proven traditional real estate practices and represents the leading edge in the future of real estate marketing by merging internet technologies, service, communication, information and analysis with those traditional practices to provide our clients with an exceptional real estate experience and superior marketing.

Paul Teasdale, Associate Broker
ABR, CRS, e-PRO, QSC, Finance BYU
14 Years Experience, 750+ Homes Sold
Team Teasdale, Utah County Real Estate
Phone: 801-491-7653

http://www.UtahCountyListings.com
Email