Crazy low mortgage rates, an inventory shortage, and a desirable community; prices will keep rising.
There seems to be a lot of fear in our community and in the media today. Fear of the corona virus has bled into the stock market resulting in a major selloff and losses for many investors. Within this cloud of fear, there is a ray of sunshine for the housing market. This week, the Federal Reserve moved to stabilize the economy and stave off a recession by lowering the Federal Funds Rate. Mortgage markets, whose rates closely follow the 10-year Treasury note anticipated this drop, and have reduced mortgage interest rates to historic lows. According to Mortgage News Daily (http://www.mortgagenewsdaily.com), today’s average quote for a 30-year fixed rate mortgage is 3.16%!
If you’ve followed my writings, I generally believe that the housing market is inflated and that a correction is due. However, with mortgage rates near 3%, and the Federal Reserve stimulating the economy, I believe there is sufficient data to suggest that real estate prices in Washington County will remain strong for at least the next 12-24 months. During this period, you should expect to see rising prices in southern Utah.
The St. George area is a desirable place to live. While the population of Washington County can balloon to over 220,000 people during a busy weekend (https://www.thespectrum.com/story/news/2019/04/24/st-george-washington-county-utah-census-population-residents/3555478002/), the area still has that small town feel. Even the busiest afternoon traffic is mild compared to Salt Lake, Las Vegas, or Southern California roads. There is virtually no violent crime, the winters are mild and the weather is beautiful most of the year. Combine these factors with the region’s close proximity to the desert, to State and National Parks, and a variety of recreation opportunities, and it’s no wonder the St. George area has been one of the fastest growing communities in the nation for nearly a decade.
Even though prices have been climbing for over 10 years, housing is still relatively affordable compared to other parts of the country, and neither house prices nor population growth show any sign of slowing.
It’s time to invest in Southern Utah
We are currently experiencing an inventory shortage. There is a 3.2-month supply of homes, and in certain price ranges, inventory is even more limited. In February 2020, prices were up 11.4% over the same period in 2019 (Washington County Board of Realtors FlexMLS – https://www.flexmls.com/cgi-bin/mainmenu.cgi?cmd=url+other/run_public_link.html&public_link_tech_id=1isa9ftcy3te&s=6&id=1&cid=1 – this link is valid until 4/4/2020).
Record low interest rates, which reduce monthly mortgage payments and make home ownership more affordable, will continue to increase demand for our limited supply of homes. With low supply and strong demand, prices will rise.
A small bit of relief
It has been 3 years since interest rates were below 4%. Many homeowners, myself included, secured financing at these great rates, and have been disincentivised from selling their homes and moving up because they were unable to replace their favorable financing. If interest rates remain low for an extended period of time, we should see this group of homeowners begin to sell their homes, freeing up some housing supply.
What should you do?
We need to build more homes. If you have money available to invest, I encourage you to seek me out, and let me connect you with one of the great homebuilders I work with. You could provide all or part the necessary capital for construction of a spec home, and possibly make a phenomenal return on investment.
If your mortgage rate is above 4%, call me, and let me connect you with one of my preferred lenders who will help you refinance your loan and save thousands of dollars over the life of your mortgage loan.
Don’t own a home? You need to. Call me, and let’s talk about what kind of home makes sense for you.
With prices high, and interest rates low, it is time to sell your house and buy or build your dream home. Call me, and let’s talk about how to facilitate the sale of your home and purchase or a new one.
On behalf of myself, our employees and agents, and all of our families, from the bottom of our hearts, thank you for your friendship and business.
Joe Allen – ‘Southern Utah’s Home Adventure Guide’