Park City's high-end home market

In the last issue of the Park Record, local realtors insist that the “bottom of the market is near,” as total real estate transactions in the greater Park City area for the first six months of 2009 are down about 50 percent compared to the same period in 2008 and 75 percent down from their peak period of 2007. Obviously, realtors list and sell properties and they would like to tell the would-be seller that it's now okay to list and the prospective buyer that the market can't go any lower. Talk about like having your cake and eat it too!

The reality is different; the market is spooked and investors are still waiting on the fence. One big thing is that jumbo loans (those that exceed the $729,750) can no longer be re-sold to Fanny Mae and Freddy Mac or investors who don't want them. That's a relatively small amount within the Park City limits where the median sales price for a single-family homes during the first half of 2009 was pegged, in that same article, at a staggering... $2.3 million! These loans are therefore much harder and more expensive to obtain while loans for condominiums to be used for nightly rentals, are all but impossible to get. These two segments make up for a huge portion of Park City's real estate market. In the old system, anyone would could state an income at $1 million a year would qualify for a $1-million loan. As a result, inexperienced contractors and novice investors suddenly became residential developers during the boom and got plenty of loans.

After last September's credit crisis, lenders were left holding loans for over-priced homes and half-completed constructions; the result is that today, if banks lend jumbo loans, they've got to keep them. Even if a bank can afford to do that, they're going to price those loans at a higher rate. So here you have the reason why the Park City real estate market has not bottomed out yet. With currently about 414 homes and 225 condos listed over the $1 million price-tag, the fall promises to be spectacular. For my most recent predictions, please check my June blog on the subject...