Who would’ve thought since my last market update we would have seen the complete meltdown of the American economic system? OK, perhaps a slight overstatement but when Alan Greenspan uses the term “credit tsunami” it certainly perks people’s interest. Overall, as you’ve read, heard and seen, the housing market throughout the United States has hit some rough water. Not only are inventory levels up but the credit markets have tightened to the point of choking off a good deal of the buyer demand. The good news is the Utah market, to date, is handling the crisis a bit better than many parts of the country.
As you will see in the attached reports, although we have been impacted by current economic events, the devastation we see in some isolated markets around the country has not yet reached our communities. That said, there are certainly market segments within our area which have been severely impacted. In particular the luxury home market (homes priced over $750,000 here in the valley) has really slowed with nearly six years of inventory sitting unsold as I type this. The market with the least impact to date is the under $250,000 segment. We continue to see a reasonable balance in that market segment between buyers and sellers.
In Davis County as a whole, you can see the slowdown in the following table and graphs:
Given the continued decline in the stock market and the slight increases in the jobless rate, along with the general uncertainty in the economy right now, every indication is the fourth quarter of 2008 will be one of the slower quarters, in terms of home sales, in recent memory. Now, that said, the fourth quarter is traditionally the slowest quarter in any given calendar year, so a good portion of the slowing will be due to normal seasonality. I would expect home sale activity in the fourth quarter of 2008 to be approximately 25-30% less than the activity we experienced in the fourth quarter of 2007.
Closer to home (literally) here is a quick summary of activity for Farmington (as well as the corresponding Davis County information for comparison:
In spite of the unit sale slowdown mentioned earlier, average sale prices are holding up well with prices at the levels reported during the same period in 2007 for Davis County. Farmington specifically is reporting a slight overall increase in average price points, however pricing pressure is building in the market currently and fourth quarter sale prices may bring that average down to zero or slightly negative. Median sale prices have also held up well consider the slowdown in unit sales. When comparing Davis County to various other parts of the country (and other areas of Utah), Davis County is holding up relatively well.
It is easier to see the trend lines when looking at quarterly, year over year data:
In spite of all the negative market indicators currently, the data does reflect a silver lining for a certain segment of the market. The data confirms a continuation of the healthy buyer’s market which began to take shape in the first half of 2007. So, buyers in this market are able to see price points approaching those experienced in 2004 & 2005. This presents a good opportunity for either first time home buyers or for “move up” buyers as the affordability index has improved over the past 12 months. In addition, it is anticipated the credit markets should begin to loosen as the “bailout” packages (both in the United States and Europe) begin to show some traction.
