Is our Property Values Roller Coaster Headed Back Down?

I spoke today with a good friend and local appraiser here in St George. We talked about the market in Southern Utah and what he’s seeing in terms of Property Values in the area. He mentioned that across the board he’s seen a substantial drop in sales and an increase in Real Estate Inventory.

This didn’t surprise me because I’ve actually had multiple conversations similar to this one over the past few weeks. Appraisers, Real Estate Agents, Builders, and other lenders have all noticed a sudden drop in business. One Realtor compared what’s happening to the feeling you get on a Roller Coaster. The part just as you reach the top and start to head back down.

But don’t go running for the hills just yet. I’m not implying Property Values are going to crash and neither is anyone else I’ve spoken with. However, it seems to be widely accepted in the real estate community that we’ve reached the peak of the current market and we will likely see property values begin to level off and even head back down.

Because of the Great Recession of 2008, a lot of people fear another major crash is imminent. However, I’m not convinced that’s what we’re seeing, these are the reasons why:

Quality of Lending

The last mortgage meltdown was primarily a result of risky lending practices by banks and consumers. The Negative amortization and stated income loans used in widespread speculation created a fragile surge in business that ultimately crashed us. Lending practices for the past ten years have been pretty conservative and most people who’ve bought a home in the last decade could legitimately qualify to do so.

Suppressed demand

The graph below shows new Housing Units in the U.S. from 2000 to 2015. From 2000 to 2006 we averaged roughly 1.5mm new homes per year. The consistency showing in the graph would argue this was pretty close to normal demand. After the crash in 2008 new housing units fell to between 500k and 800k per year from 2009 until 2015. Since 2015 we’ve seen a big surge in new housing units but this demand isn’t a result of speculation as it was in 2006. More likely this demand was a result of the suppressed demand we’ve had from significant underbuilding from 2009 to 2015. Once the economy returned to normal, new home buyers could come back out of their parent’s basements to buy their own home which is likely what pushed demand up.

New Housing Units from 2000 to 2015

What does this mean for you?:

Whether we’re entering another market crash or a minor correction, a lot of industry professionals seem to agree that property values have peaked and we are likely to see lower property values in the next six to twelve months.

If you’ve been holding off on doing something like selling a home, refinancing, or doing a Reverse Mortgage because you wanted to maximize your opportunity by waiting until the market hit the top, now is the time to move. If this pattern continues your window of opportunity is now open and it won’t get any better in the near future.

Property Values Wave:

If you don’t live in Southern Utah you should still keep your eyes on your real estate market for any changes. Over the summer I heard a report that home sales in Orange County and other parts of southern California dropped 17% a year of year. I’ve learned in my career that market fluctuations tend to move like a wave from Southern California, through Las Vegas and Nevada, to St George. Then on up I15 through Cedar City until they reach the Wasatch Front and Northern Utah. I would Assume the wave probably affects Colorado similarly. The point is, that unless we see a pick-up in the next couple of months to get us back on the climb we can probably assume a new market cycle has begun and values are correcting.

If you or someone you know is thinking of buying, selling, refinancing, or doing a Reverse Mortgage, give me a call to be connected with some of the top professionals in our Real Estate Market.

Trevor Carlson

President – Reverse Mortgage Specialist

Heritage Reverse Mortgage


Heritage NMLS #1497455 Trevor?s NMLS #: 267962

1060 South Main Street Bldg. A Suite 101B

St George Utah 84770