Bob Gledhill - Utah County Real Estate

Recent Evolution of Utah County Real Estate

Driven by good in-migration and the addition of more than three hundred software and dot com companies, the 1990's went througha housing shortage in the early part of the decade; Provo Homes, Orem Homes, and all Utah County homes were experiencing such rapid price escalation that loan qualifications became difficult because appraisers were having trouble finding sold comparables high enough to justify the new prices. By the mid 90's a construction boom caught up with demand. Land price escalation carried good price increases thru the end of the decade. In the early 2000's Provo Real Estate, Orem Real Estate, and Utah County homes in general developed a little bit of inventory surplus, which slowed price appreciation. In spite of the inventory, each year has continued to show increased numbers of homes sold. In 2001, 3636 homes sold; in 2004, 5527 homes sold. That was about 23% increase over 2003 in Utah County. The average sales price of a home in January 1998 was $143,560. In Dec 2004, the average sales price was $180,089 in Utah County. Recent price increases in Provo Real Estate, Orem Real Estate, and Utah County Real Estate have been steady but more modest than the 90’s. Now that California market is past its peak, we expect stronger price appreciation in Utah County Real Estate since that time has been a pattern in the past. Increasing land and construction costs have made it significantly more expensive to build a new home than to buy a home less than five years old which would also have window coverings, landscaping, building permits, impact fees, etc. already paid. Land price increases in Utah County have been dramatically higher than existing homes. The evolution of luxury homes above $500,000 has been interesting. In the 1970's and 80's, real estate insiders all agreed that if someone built a home worth more than $500,000 they would never be able sell it at fair market value, they would have to sell it at a large loss or keep it. There were few homes in that price range and few migrating into Utah who could afford over $500,000. The locals who could afford the more expensive homes, wanted to design their own homes. The mid 90's brought change. The more traditional old world designs began to have more universal appeal. People of substance became more able to locate anywhere they wanted with the fax and computer advances and lower air fares. Many started choosing Utah County for safer neighborhoods, better schools, and a more wholesome environment. Companies also began transferring people who could afford that price range, more locals could afford this price range who didn't want to wait a couple of years or more to find the land, design an appropriate home, and go thru an often long and painful construction process. The MLS didn't start tracking homes sold over $500,000 in Utah County until 4 months in to the year 2000. 39 were sold in 2001, 54 were sold in 2002, 95 were sold in Utah County in 2004. Annual units sold thru the 1980's were one to none. Million dollar plus home sales have progressed as well. We were selling about a half a dozen a year in Utah County in the late 90’s and early 2000’s; during the 12 month period through early March 2005, 16 sold in Utah County. I am aware of 7 more which are due to close in late March. Well over half have been located in the Provo Riverbottoms area. Another couple sold on the hill of NE Provo. The few others which have sold have been at Sundance, one or two in Orem, Alpine, Highland, and Mapleton. Any other cities which have had $1,000,000+ home sales were really selling land. They were homes with multiple acres of land; it would be very unwise to build a $1,000,000+ home in any place other than the stronger neighborhoods of the above mentioned cities. In summary, here are the reasons I expect movement from the smaller annual price inflation we have seen since 2000 back to the more significant annual increase we saw in the 90’s. 1) The number of Utah County Real Estate units sold has increased 23% in the last year. 2) I, along with other agents, are selling more Utah and Utah County residential and commercial income properties to people from California and other areas where the rent yield per dollar spent on the property is not nearly as good as in Utah County or Utah in general. 3) The dramatic gap between what it costs to buy an existing home 2 or 3 years old versus how much more it costs to buy land and build today. 4) In the past, our heavier price inflation has occurred after California (the largest western market) has peaked and been forced to make a price adjustment because prices have become so unreasonable and supply has reached or surpassed the demand. Some of this is due to LDS Church members who make up a significant portion of the California population, who sell their expensive California homes or income property and come to Utah where they can get dramatically more for their money, along with "lower crime rate, better performing schools and higher values expectations". Also better skiing for those of us who think that’s the closest thing to heaven on earth. Some of the above information comes from a great Utah County Realtor with 15 years of first hand real estate sales and construction experience and the rest from the Wasatch Front Multiple Listing Service statistical data base.

Recent Evolution of Utah County Real Estate

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