3/31/2006

Buyer (And Seller) Beware

This article presents potential problems in today's real estate market. The rise in home values and the fear of increasing interest rates pose problems for anyone involved in real estate. Southern Utah has been experiencing a boom in the market far more than the nation-wide average of 10%. This type of excitement brings in investors looking to make a quick buck. One of the problems that this article points out is that these investors tend to over-price their home. If the market value starts dropping, they slowly will decrease their asking price but will usually still be just over market value. They then get scared that they will lose their investment and dump it.

Buyers need to watch out as well. Take Cedar City for example. The average wage in Cedar City is not nearly enough to be able to afford a home. Renting is still cheap compared to what a mortgage payment would be. Buyers tend to overlook this because of the prestige of owning their own home. If the market drops when it comes time to sell, most will end up losing money. This is a good article to read if you are even remotely involved in the real estate market.

2 comments:

Brittney said...

This is a scary thing for residents of Southern Utah, especially for us as students. We will all be graduating soon and (hopefully) moving on to bigger and better things. For those of us who stay in Southern Utah, housing may be a tricky subject. Home prices in Cedar City have gone up extensively, but the wages offered have not accelerated as quickly. St. George wages are a little better, but homes are unbelievably expensive. Getting into a "starter home" will cost at least $200,000. Unless you already own a home, it may be difficult to afford one in Southern Utah.

Dr. Tufte said...

There is a folk theorem in economics that all gains eventually accrue to those with fixed resources.

This bodes very well for real estate investments in southern Utah (in the long run). The boom here is related to accessibility to fixed resources. Let's face it, living in a scenic area is desirable. It wasn't very desirable in this area before the building of the interstate, and water and gas pipelines. The internet won't hurt either.