The St. George, Utah, housing market's rank as No. 1 in home price appreciation during the first quarter this year is an example of how to take statistical data with a grain of salt.
Real estate agents in the high desert town and surrounding communities say after 10 years of flat home prices, 2005 took off like a rocket, but came back down to earth in 2006.
Spill-over market rush, speculators, second home buyers and others lured by affordable housing in the region of about 130,000 residents generated a frenzy that likely over-inflated home prices in 2005.
Now, new home builders, saddled with construction loans based on outdated sale price forecasts, refuse to lower prices, as resale home owners take the brunt and lower prices to make the sale.
What a difference a year makes.
"This year is different from last year. We had an increase in prices in the county by about 32 percent in 2005. This year is a complete reverse. We are back in a buyers' market again, saturated with inventory and everyday we see reductions in prices," said Bonnie Musser, a real estate agent with ERA Brokers Consolidated in Hurricane, UT, one of the satellite towns surrounding St. George.
St. George is the county seat and center of commerce for Utah's Washington County nestled in the state's southwestern most corner, about 150 miles from Las Vegas, NV, and about twice that distance from Salt Lake City.
The Office of Federal Housing Enterprise Oversight's Home Price Index for the first quarter 2006, the latest data it has published, put St. George at the top of the heap of home price appreciation.
From the first quarter last year to the first quarter this year, prices appreciated by 38.4 percent, but in the last five years the appreciation was only 79.75 percent. Half the increase was from recent market conditions that have since vanished in a market where the same number of buyers have much more choice and room to negotiate.
"It was a little frenzy there for a while," says Janelle Peratis, a real estate agent with Prudential St. George Realty.
"In the beginning, there were bidding wars and homes were selling for more than asking and I think people became a little greedy. So we got all these homes on the market at outrageous prices. Now we are seeing a lot of price reductions. It's a more normal market," Peratis added.
At 2,800 feet, St. George is a dry, hot, high desert region on the edge of the Mojave Desert with little precipitation, but it's loaded with geographical gems including the nearby Zion, Bryce Canyon and Grand Canyon National parks.
It was founded in the 1850s after Mormon leader Brigham Young ordered it established as a cotton mission to help the church become more self-sufficient during the period leading up to the Civil War. Cotton farming never flourished and was eventually abandoned.
Today, as one of the fastest growing regions in the nation, it is the economic center of Utah's "Dixie" and enjoys a proximity to national parks that makes it, in part, a tourist town and a popular Spring Break destination, with a host of outdoor recreational activities and views to die for.
Clean air, star lit night skies, low crime and walkability along the Virgin River all make for a quaint, quieter lifestyle than in larger cities.
"I've been here (from Chicago) for eight years and I still feel like I'm on vacation," said Kathy Nielsen, a broker with Tolbert & Nielsen Realty Group in St. George.
Commercial operations also include a host of major retail, health care and service corporations -- two Wal-Marts, one a major distribution center; Intermountain Health Care, which opened a new $100 million Dixie Regional Medical Center in 2003; regional airline SkyWest as well as the obligatory Costco, Lowe's, a super-sized TJ Maxx and other big box retailers.
The area is also a popular retirement community for state residents, often hailing from Salt Lake City. In 2003 St. George was named one of EscapeHomes' Top 10 Emerging Second Home Markets because of its affordability and slow but steady growth, culminating in a price spurt.
"We do have a large group of second home buyers from Salt Lake and Northern Utah, southern Idaho, Wyoming, Montana. I'm seeing people from Florida, Virginia, Washington, D.C. and Pennsylvania," said Nielsen.
EscapeHomes.com's designation was right on the money.
Musser says before 2005, single-family home prices averaged $160,000 to $180,000 for three bedroom, two-bath, 1,600 square foot homes on a quarter acre lot.
But by 2005, along with the existing retirement emigration, buyers spilled over from more expensive housing markets in California, Nevada and Arizona and vacation and investment home buyers, with a contingent of speculators, joined the fray.
"Everything on the market had competing offers. People were going over list price with cash deals and quick closings, but that's starting to change," said Musser.
Right now, the average price for the same home is about $237,00, but prices are flat and in some cases falling.
"Most homes are in the $200,000 to $400,000 price range," said Musser.
What put the brakes on the market isn't certain, but, like many other boom markets in the nation, housing prices surpassed the point of affordability for local residents and the growing supply of new developments swelled inventories.
Musser said, "It changed right at the beginning of the year -- 2005 ended with a bang and 2006 started with a flop."
