St. George real estate sees return to affordability
St. George real estate sees return to affordability
President’s Message
Chris Sloan
As I write this article and see winter’s latest offering out my window — a traffic-snarling March snowstorm — I can’t help but envy those in Utah’s Dixie who are going to be enjoying 70-degree weather this weekend. With its mild climate and warm sunny days just a few hours away, St. George offers a convenient — and now affordable — winter escape for those who live along the Wasatch Front.
Once the nation’s leader in home price appreciation, St. George’s high-flying real estate market has finally come back down to earth with affordable prices now being the norm rather than the exception. A recent search of St. George single-family homes under $200,000 showed 164 for sale — an inventory number that would have been unheard of a couple years ago. A search including townhomes and nearby cities like Washington and Santa Clara yielded even more choices in the under $200,000 price range.
As the U.S. home price boom took place over the mid part of this decade, St. George real estate followed the trend, also seeing huge increases in prices. In the first quarter of 2006, St. George had the highest appreciation in the U.S., with prices increasing about 38 percent over one year, according to statistics from the Federal Housing Finance Agency. Similar statistics from the Utah Association of Realtors show during the boom period from 2004 to 2006, the average home price in Washington County increased by about $130,000.
The double-digit home price gains during the period put St. George ownership completely out of reach for many would-be Wasatch Front buyers looking to relocate or buy a second home. In fact, the competition to buy homes was so intense that some buyers waited in lines to just get into open houses, and homes often sold for 15 percent more than the seller’s original asking price.
But that has all changed, and now buyers are the ones who hold the cards. With a large supply of homes on the market, buyers can choose from any number of houses in a variety of neighborhoods, with the homes commanding much lower prices. The most recent statistics from February show the average St. George home price down about 24 percent, or about $65,000, compared to February 2007. Keep in mind that this figure is just the average; high-priced properties, short sales or foreclosures may offer even greater discounts.
Combine the incredibly low home prices with super-low mortgage rates and we see an even greater improvement in affordability. Since 2006 at the height of the St. George housing boom, mortgage rates have fallen by more than a percentage point, which alone reduces the price of a home by 10 percent.
Numbers from the National Association of Home Builders/Wells Fargo Housing Opportunity Index illustrate the substantial affordability improvements. In the final quarter of 2006, only 16 percent of St. George homes sold were considered affordable to those earning the area’s median income. In the two years since then, affordability has almost tripled, increasing by about 26 percentage points. The Housing Opportunity Index takes into account a number of factors that affect affordability, including home prices, incomes and mortgage rates.
Naturally, there may be some concern among potential buyers who are fearful of further price declines in the area. But even if prices continue to fall, buying now could still make sense. Gus Faucher of Moody’s Economy.com recently told the Salt Lake Tribune that interest rates are so super low that there’s a strong argument for buying now because he’s predicting interest rates to creep up in the second half of the year. That would mean even if home prices continue to drop, you could have the same mortgage payment next year because of the higher interest rates.
There are also signs that buyers are beginning to renew their interest in St. George real estate. Local Realtors are reporting multiple offers on some properties, a sign that more buyers are in the market, and the Washington County Board of Realtors is seeing declines in their high inventory levels, a trend that if continues will begin to help properties hold their value.
Recent activity in former boom markets is also a good sign. Nearby market Las Vegas has recently seen a 27 percent increase in its home sales because of its moderating prices, making it No. 15 on BusinessWeek’s list of ZIP codes with the most improved sales. If history is any indicator, St. George, which tends to follow the Las Vegas market, could be in for some home sales increases of its own.
Affordable homes, ample selection, seller incentives and low mortgage rates make St. George the perfect buyer’s market. For more information about buying a home in Utah’s Dixie, visit www.SGTrends.com or contact a Washington County Realtor.