Friday, December 02, 2005

St. George among top 5 U.S. cities in home value appreciation

In the DesNews this morning it was announced that housing prices are soaring, with my home, St. George leading the pack. "With an appreciation rate of 31.57 percent, St. George earned a No. 4 spot among 265 U.S. cities and was the only Utah city to break the top 20." St. George apparently beat out Orlando FL. The article interviewed the owner of REmax in SG and he attributed the price increase to out of state investors. "They are buying everything." El-Bakri said, "but you've also got 38 million baby boomers that are getting ready to retire. Today, I'm driving down the street and my car says it's 61 degrees, and it's December. I actually played golf yesterday. This is the lifestyle that people want." Although the weather may be good in St. George, it sure is cold if you aren't in a home here now.

The driver of this housing market, I suspect, is almost purely speculative. On average I have at least one client call me a week about building spec. homes, and all of the new business clients I see are new construction start-up businesses or realtors. This growth can't be sustained without a starter home market, and soon the starter home market will be totally out of reach for the start-up families. It is frustrating to me to see a market in this town (void of industry other than construction, and medicine) where the only housing BARELY under 150k is a home on wheels.

Forgive my coming rant.

The prices in St. George are ridiculous. From the city's website, the average salary in St. George is $1,351 dollars a month, the median family income is 40k, and a neighbor in my last neighborhood just sold a 1100 sq. foot townhome (no yard) for 205k. Judging from my memory of a personal finance class I took as a freshman in college, generally a family or individual should only take on, and banks are likely hesitant to give a loan at payments more than 30% of their income. Given that, for the average wage earner owning a home is an impossibility, at 40k a year even owning a small townhome is pretty much out of reach, so how can this market be sustained?

Something has to break here. Without an influx of major industry to St. George the house values will either fall drastically, or other communities (Cedar City, Mesquite, or Kanab) will have to serve as a home for many middle class families. As supply is (I believe) starting to outweigh demand, I feel that many people will suffer the disappointment of seeing meager returns on their home equity. However realtors argue and historically land prices don't drop drastically, therefore I think that many middle-class families (like mine) will have to leave St. George to live in rural surrounding communities and commute to SG, or leave the area all together, in order to obtain the American dream.

Damn it I need a raise!


Bradley said...

I've written and erased my comment five times. I just don't know how to express how I feel about this issue. I guess the heart of it is that I think our society and economy will be more healthy if home ownership is possible for most people. I just don't know if it is possible or wise to try to enforce that future.

pramahaphil said...
This comment has been removed by a blog administrator.
pramahaphil said...

I agree. I hope that in the long run, supply and demand, and inflation will bring things back on a stable level playing field. I believe that the bubble will pop and prices will at least level off as incomes increase to match the high housing costs. Classic economics.

Former Centerville Citizen said...

I would be interested to know what percentage of jobs in St. George are development related (construction, real estate, etc.). Maybe I don't know the St. George area well enough, but I'm having a hard time trying to think of any real major industry in town, besides development and tourism. IMHO, it's not healthy for a rapidly growing city to not have some real solid industries.