Farmington Utah Market Snapshot - First Quarter

Well we finished a rather interesting first quarter (how’s that for a euphemism?). My current Farmington market snapshot report for the most recent quarter is included for your review. We are starting to distance ourselves from the frozen credit markets and corresponding near screeching halt in the realty market experienced in the fourth quarter of 2008 and after the first of the year. However, the local real estate market is still a bit sluggish.

As I mentioned in my fourth quarter report, the impact of elevated inventory levels and the increase in distressed properties (e.g. short sales, foreclosures) is being felt as these properties are now getting offers and closed and the price impacts being reported. The impact on average sale prices is now materializing as sellers are forced to adjust their pricing in order to obtain offers. The trend line continues to be downward and most analyses indicate this trend will likely continue through at least the first half to three-quarters of 2009. The good news is we are continuing to see new listed inventory counts begin to decline thus slowing the pipeline of competing inventory. However, as you can see from the “Listing Inventory” section of the report, we continue to carry a high on-going inventory in all price categories as measured by the Months Inventory calculation.

It does appear the Fed’s ability to keep long-term interest rates moderated is helping to some extent. We are continuing to see sales activity, albeit reduced, in all price point ranges. In fact, you might notice in the Buyer Demand section the average home sale price in Farmington increased a whopping 15% year over year. Well, not exactly. There were two sales over $750,000 that closed in the first quarter (one over $1,700,000) thus skewing the averages for such a small sample size. The actual pricing impact year over year is better illustrated by the 4% decline reported in the median price point.

So have we hit bottom yet? That’s a question I am asked frequently and my response is always the same. "Perhaps, but we won’t really know until we can look back at one or two quarters and then definitively say that was the bottom." I have yet to find someone who has the ability to accurately predict a bottom, but there are a vast number of people who can report a bottom. This is just as true in the stock market as it is in the real estate market. As with the stock market, the real estate market can rebound slightly and then re-test the bottom a few months later. We won’t truly know when we hit the "bottom" until we are one or two quarters removed and can definitively state "that was the bottom back there."

This spring and early summer season (May through July) will tell us a great deal about the market’s ability to reach a stabilization point. I use the term stabilization as I think "rebound" does not accurately reflect what the market reaction will likely be. My personal perspective is once we reach a more stable market (with months inventory in the six month range and average days on market declining into the 50 – 65 day range) we will likely have a relatively flat market for another 12 -18 months as consumer buying power begins to rebound.

As always, if you have any questions regarding the local market, feel free to contact me at any time.