Washington County's Residential Market Looking at Slow Recovery

Tuweap Point is a residential, gated community in St. George.

By Ken Holman

Overland Group President

Vardell Curtis, CEO for the Washington County Board of Realtors and Scott Gibson, owner of a local mortgage brokerage firm, presented the outlook for residential real estate at the 13th Annual Washington County Economic Summit held in St. George at the Dixie Center on Wednesday, Jan. 13.

 The presenters tried to put a positive spin on a negative situation. But it is apparent that Washington County is experiencing a recession in the residential real estate market. With significant overbuilding, Washington County entered the current economic downturn earlier than most other communities in Utah. Both construction permitting and sales showed year-over-year losses, although there is some evidence that the economy may be bottoming out in the coming months. While no industry in Utah has gone unscathed during this recession, construction, manufacturing, professional and business services have been the hardest hit with almost 75 percent of Utah’s job losses coming in these areas.

The real estate business in Washington County appears to go through 10-year cycles. In 1985, Washington County hit a peak in building permits at 2,418 for that year, followed by 711, 616, 466, 478, and 777 for the five years immediately following that boom year.

In 1993 and 1994, Washington County experienced record years for building permits with 1,835 and 1,934 permits respectively. Things declined over the next five years to a total number of building permits of 1,241 occurring in 2000. Building permits peaked at 3,479 in 2005 followed by a collapse in building permits and ending 2009 with of 388 permits. Washington County now appears to be at the bottom of another 10-year cycle.

Not only have residential building permits plummeted, but construction values have dropped nearly 30 percent since 2006. Notices of default and foreclosures have been higher in 2009 than in any other year on recent record. Present home sales activity for Washington County shows there were, as of Dec. 31, 2009, 5,305 active listings with 278 sold during November 2009.

Based on November home sales, it will take an average of 19.08 months for the existing inventory to be sold. Based on the average of 233 home sales per month over the past 24 months, it will take nearly 23 months to sell the existing inventory.

Homes listed from $300,000 to $500,000 are on the market for fewer days than homes priced from $500,000 to $1 million. Homes ranging from $600,000 to more than $1 million, have been on the market for as long as 63 months.

On the bright side, home prices are beginning to rise in the area. Home prices hit bottom in September 2008 and remained at the bottom through February 2009. Since February, prices have started to rise. Home prices are still below their 2005-07 peak, but they have stopped declining.

Bolstered by the state’s $6,000 Home Run program and by the federal government’s $8,000 tax credit for first-time homebuyers, the market is starting to climb out of the housing recession. Economists seem to agree that housing sales have bottomed. Economist James Wood, director of the University of Utah’s Bureau of Housing and Economic Development, believes home sales hit their low point in the first quarter of 2009.

Mark Zandi, chief economist and co-founder of Moody’s Economy.com, expects sales to continue to improve over the next two years until reaching a normal trend in 2012.

Washington County was one of the hottest national markets during the housing boom and has since witnessed one of the sharpest corrections. The real estate market in Southern Utah is now set for a slow trek upward.

There are some reasons for optimism. First, Southern Utah remains a hot retirement destination as Baby Boomers continue their march toward retirement. Second, with average mortgage payments below market rental rates in some areas, investors and home buyers are finding opportunities where market prices are significantly below the cost to build. Third, would-be buyers who were previously priced out of the market can now afford to purchase.