Rising Utah
Home Prices Needn’t Cause Sleepless Nights
As home prices continue to rise
throughout most of the nation, sooner or later people begin to wonder whether
we’ve crossed the threshold dividing undervalued from overvalued. Pundit
shorthand for “overvalued” has gradually become almost synonymous with
the far more fear-inducing term, “Bubble.” As with the chewing gum and
soap-blowing varieties, the term can’t help but conjure up visions of the
associated “Pop!”
Just worrying that we are in a home
pricing bubble can cause sleepless nights and worse — financial paralysis. As home prices in Utah move higher, it’s natural to wonder if they
are truly justified by economic fundamentals. While no one wants to be on the
other side of wrong, no one wants to miss great deals on Utah home prices, either. How to know?
Bubbles are notoriously hard to define,
but to address the issue, the Trulia real estate web site has just come out
with a new tool designed to assess whether today’s home prices — including
those in Utah — are overvalued or
undervalued. They compare the latest prices with historical incomes, prices,
and rents.
The first findings are reassuring.
Although residential price gain percentages do rival those of the last decade’s
bubble, that’s deceptive. They started from a much higher perch. The decline
from 2005-2006 was steep enough that (aside from a few metro areas in
California and Texas), the fundamentals show that the current gains look a lot
more like a rebound than a bubble.
Trulia found that as of last month, national home
prices remain undervalued by 7%. During last decade’s bubble, prices
went as high as 39% overvalued. Their takeaway is that home prices remain
considerably lower than they were during the last bubble.
So bubble-watchers can rejoice or rebel,
but as far as this Salt Lake City agent is concerned –
Trulia has provided some very pleasant news. “Rebounds” bring about visions of
happy kids on trampolines (and rebounds don’t pop). The news is excellent for
instilling a positive national outlook, but more locally, if you’re looking for
the latest information about Utah's home
prices and activity, contact me for a no-cost, no-obligation consultation.
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