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Show ‘wesw “THE OGDEN VALLEY NEWS Page 13 August 1, 2005 Real Estate in Ogden Valley Home Buying Mania - around the Ge with an Africa, Hong reaching dangerous levels. What is driving this house-buying mania ae can it last? Why are these inflated housing prices dangerous? before has the world seen home values rapid rise in housing prices has been tiiven . bismrtly low interest rates and a loss in faith in equities after the not so distant stock market plunge. But while econom, ists continue to wam that tive, today the trend still continues with home prices continuing to rise by 10% or more in ten major countries within the developed world. According to tw articles in the June us es issueae The Eocnomist magazine, “America has of the biggest increases in house- pre infleton o over the past year, with the average price of homes jumping by 12.5% in the year to the first quarter. In California, Florida, Nevada, Hawaii, Mayland, Washington, DC, they soared by more tl Evidence that home p rices are over-valued is usually tied to rents. The ratioof home ee torents le price of homes in the housing market is seule or over inflated. In other words, the price of a house should reflect the benefits of crnenhip through the rental income it can generate or by the rent saved if it were owner occupied. These two determinates should be clo:sely related ina stable market. Buttut today, onaverage. 1975 = ore With today’s inflated aes the ratio of hot ices to rents can only be evened out if inflation pushes up rents and incomes ‘while home prices stay ee or by home prices falling. Since rents would need to se by 22.5% annually for 12 years to even out paetr s ratios while home prices remained static, and since inflation rates our currently relatively very low, it’s se more likely that home prices vill eventually have to fall. Today, even the Federal Reserve is “fretting’ about what is ene ae prices rising ai to peculative demand. A study by the National Associ iation of Realtors found that 23% of a American homes bought during 2004 were for investment purposes only—not for owner occupation. Investors were willing to invest in homes they were willing to take a loss on in rents because the’ anticipated that home prices would continue to rise—the definition of a financial bubble! Riskier mors of es finance—such 8 as interest only mortgages—are also contributing . this financial bubble innthe housing market. Also, home buyers are taking out bigger mortgages and existing owners are increasing 2 their mortgages to a neo capital gains into cash that they can spend.T of borrowing that is taking advantage of tte housing booms tends to be more dangerous than stock market bubies and 4 Fa end ad k k ic weakness. Economists state that the current house-price inflation trend can not continue, and hasn’t in other countries such as Britain and Australia—countries By Layne Sheridan, Ph.D. Century 21 Gage Froerer & Associates cent, or 2.5 percent per year. Not exactly the “postOlympics real estate ” everyone expected, right? Actually, the post-Olympics boom is finally arriving—several years later than projected. A Valley Real Estate Boom. As you look around the Valley, you can see that real estate is booming. But what about prices? If you own real estate in the Valley, the news is very good. From 2003 to 2004, sales prices increased by 6.8 percent. Not bad for one However, the rate of en but not exceptional. increase has accelerated rapidly over the pastfew months. The following chart shows the 6 and 12 For History Buffs — the past four years. History gave little indication that the was coming. Both single family homes and condos appreciated over the past four years, but certainly not at the double-digit annual pace experienced in other parts of the country. Let’s look at sales trends separately for Ogden Valley Residential Real Estate Sales Prices 6 and 12 Month Rolling Averages $300,000 th lat as the U.S. and other developed countries are following. Pricesi in Britain and Australia have finally slumped Britain, Sweden, and Japan have all seen a drop in average house prices during the past decade along with a slowing in consumer spending. The Economist we ou “One of the best international studies of how house-price busts an hurt economies has been done by the International Monetary Fund. Analyzing ‘house peices in 14 cunaties during 1970— 2001, it identi. ie ist when real prices fell by st 30% on average> fall in nominal prices was *s amalle r). Allb e of those housing busts led to a recession, with CGDP after three years a to an average of 8% below its ine growth tre America was the onlyc bust during that period. "This time it looks fheh to join the clu “Japan provides a nasty waming of what can happen when boom a tobust. Japanese property prices have dropped for 1 years in a row, by 40% fromm their peak in 1991. Yet the rise in prices in Japan during the decade before 1991 was lessthan the iincrease over the enced housing 2 booms. Andit is surely hat Japan and Germany, the two countries house prices have fallen or most of the past a = Compiled by Shanna Francis Ogden Valley News | all developed economies over that period. Americans Hoare + to 1s, | . I | Idk 1 Py I A eatitcadtn Taal seas.” In conclusion, The Economist predicts that American boxe see will aOeyebea falling sometime nextyear. “The housing as fun while it lasted, buttthe biggest increase inwealth history was largely an illusion.” in $290,000 $280,000 $270,000 $261,100 $260,000 SENGND $250, or each month, t number is simply the average of all sales prices over the previous or 12 months. For example, December's 6 month average covers July through December $261,600 ‘s . $251,300 $240,000 + $232,300 $230,000 $220,000 $210,000 . $200,000 What is a Rolling ? $290,200 . while January's 6 month > | $228,700 + T Jan T Feb uy Mar —+—6 Month Wasatch T Apr May average covers August hrough January. Rolling averages give a better estimate of price trends than monthly figures which can fluctuate wildly as a result of one 1 Jun —s—12Month large sale. Front Regional Multiple Listing Service, rolling average of sales prices during 2005. During the first five months of this year, the 6 month average sales price increased 26.9 percent. This is a considerable rate of growth. If it were to continue, the annual rate would be over 53 percent! The graph also shows that much of the twelve month increase is due = the last six months. i the change in the rate of t e, the results would be even more exciting. If sales are this hot, why are so few people aware of it? Press reports tend to focus on the entire state or perhaps Weber County, not the Valley. Also, annual statistics are misleading because they cover a long time period. According to statistics from the Wasatch Front Multiple Listing Service, the average price oof a home (single family and condominium) in Ogden Valley has increased by $21,788 over the past four years, from $211,654 in 2001 to $233,442 in 2004—an increase of 10 per- Inc. for the period 2001 through 2004.) single family homes and condos. Single family homes. Over the past four years, single family home prices increased 17 percent. Mo loreover, the number of sales in 2004 was nearly double that in 2001. In general, Ogden Valley real estate sales prices are much higher than those in Ogden—the 2004 average for single family sales homes was $263,900 in the Valley, compared with only $136,378 in Ogden. In fact, the difference is even larger because sales statistics for several upscale new valley developments such as Trappers Ridge and The Fairways are not available since they are not marketed through the Multiple Listing Service. The prices of homes in both of these developments are substantially higher than the average for the primarily resale properties included in the MLS REAL ESTATE cont. on page Gage Froerer & Assoc. (801)745-4221 roy ren rare Oa Home! Quality built home & barn. Great ean location- VIEWS! 6,300(+) sq.ft. D, 4.5 BA, GR. eLemmrSE Om Tr mY ZA nr tub a Serre 00 Call Joan 675-0444 Naty LISTING! 3200 sq. ft. Rambler on 9.25. AC, ae Horse property, views of Snow Basin Ski Res MRU ae eh ion runs fuepach property. $900,000. Call Kirk 710-9460 oree CU elm) AW Cita Star CCondo Condos are going fa Nice quiet area, views of Ogden Valley Pineview Reservoir, Snowbasin Ski Re: Wolf Creek Golf Course. $219,000 Oa e ninco! Eden Office 2405 Highway 158 LIL V.UN TOI BROKER Deborah Hegg (801)745-1538 CACOm od REALTOR FOR RENT: This lov pe home ail lB ee = Ela Mse eons wel ee CM Tyriree: esa) BD, 3 BA a great room mn asen Celta nen fabulous views, decks,2 car garage. Pets '! $1400 per month. Deborah 745-1538 cape to the mountains in this elegant WO w/ spectacular views. Features marble tile, counters, 10 ft. ceilings, 4 car gar.,2 ra master suite. mature trees w/seasonal stream in back. A must see! Call Sue Hansen 710-3833 losest condos to w Dam. 2-story,2 2.5 a washer/dryer, "hot tub on deck oe beautiful views. Lakeside Condominiums NRA LIU (OF mvt. ey Coma Oe 388-2196 laynesheridan@century 21.com| REALTOR Susan Hansen 710-3833 psortproperties.com td rn TMU N Creo nlm err: (ely lous master suite w/fireplace.Lg. deck w/ views of Snowbasin, Wolf Creek golf course and the lake. Easy life style, the perfect get away! $239,900. Call Deborah 745-1538 Brick & cedar, 4200+ sq. ft. Rambler on acre of horse property! 3-car oversized eo . Secondary water. Excellent condiHon! $335,000. Call Sue 801-710-3833 BUILDING LOTS RENTALS WOLF LODGE Condo 2 bedrooms $700 per month Call Deborah 745-1538 Great 3 bedroom, 2-car garage Wolfstar Condo $875 per month. Call Deborah 745-1538 LARGE PATIO SPRINGS SPRING MOUNTAIN 5.99 AC Pristine Alpine setting 5,000 745-1538 105N kirkmoorel@aol.com 6.3 AC + creek Snowbasin Rd. $258,000 EDEN TWO (2) buildable lots for HUNTSVILLE 4.92AC- REALTOR Kirk Moore 745-9679 HUNTSVILLE home -3200 Available 9-1-05 Call Deborah One of a kind custom home w/ ex views. Contemporary rustic design 5000 sq. ft. w/ water features, copper, stain glass, marble & wood. 4 BD, 3.5 Va 3 ar garage. $585,000 Call Deborah 745-1538 Beaver Creek $79,900 $75,000 each. All utilities stubbed. One (1) is a corner lot near golf course. REALTOR ACen MN Cer id Rees Joan4c21@aol.com 15 |