The Salt Lake Board of REALTORS just released last month’s sales data for Salt Lake County. Basically, all the stats pointed downward form the same time last year, to wit: 1) number of sales of all types of property were down 26.1%, 2) the median single-family home prices dropped to $600,000 (down 4.1%), 3) the number of sales of just single family homes down 26.1% (748 sales in June), 4) median price per sq. ft. $254.41, down 1.2% and 5) the median home price of all types of residences down 4% to $519,000.
Last week the Fed met and raised key interest rates it charges to banks by .25%, the 11th time since last March, and the highest level in 22 years. Mind you when I got my real estate license in 1984 interest rates were 18%! Houses were NOT selling, and builders were in a panic. The market responded by creating something called a ‘negative amortization loan’ which almost immediately boosted home sales here. How did that work? Imagine walking into a builder’s sales office knowing that mortgage rates were 18% for a 30 year loan, but the builder’s rep asked you if you’d buy one of their homes if the interest rate was 6.5%? Well of course, you’d be interested, right? The deal was that indeed, the rate would be that low, but the interest difference between 18% and 6.5% would be added back into what you owed on your mortgage…11.5% each month. That difference would increase what you owed the bank each and every month, and well, if you wanted to sell a few years after your purchase you’d find out you owed MORE than the property was worth! Just like in 208-09, many people lost their homes and simply gave them back to the bank. The 1980-82 recession in the U.S. was the worst economic downturn in the country since the great depression and property values dropped. It was influenced by the 1979 energy crisis which was mostly caused by the Iranian Revolution that caused a major disruption to the global oil supply. There were long and ugly lines at gas stations around the country as vendors ran out of fuel due to the poor supply chain. Much like today, Americans in the Reagan era were concerned with high budget deficits in the U.S. Treasury and bemoaned a lack of trust in the government. Sound familiar?
The June sales stats also picture a local real estate industry that can’t possibly support a living wage for real estate agents when total sales in a month of all types of residences in the County were a mere 1,072 when there are over 10,000 members of the Salt Lake Board of REALTORS. That stat points to just over 10% of the membership selling homes last month, and like any sales profession, ‘10% sell 90% of the inventory’. Thinking of being a real estate agent? It’s a tough business!