Before reading this, you may want to take an antidepressant.
That was the advice from Realtor Ray Pugel before giving an update on the Rim Country’s real estate market.
“The real estate market is a little bleak,” he told more than a dozen residents at the Citizens Awareness Committee (CAC) meeting Thursday. “Payson was hit harder than other areas.”
The facts: For the Payson, Star Valley, Pine and Strawberry area, there has been a 32 percent drop in home prices since 2008. Prices are comparable to those in 2000 and 2002. No database keeps track of foreclosure properties, although 33 percent of appraisers’ work is in this area. There is a four-year supply of homes valued at $400,000 or more currently on the market.
All this and interest rates have never been lower, Pugel said. The only problem, buyers have to qualify for these low rates.
So how did the Rim Country find itself with hundreds of homes on the market at slashed prices, but with no buyers? And how can the area pull itself it out the hole?
Pugel suggests looking at economic development for answers.
How did we get here?
Pugel blamed the housing bubble on subprime mortgages, lax lending and “liar loans” common in 2005 when the market was booming. Liar loans was the practice of issuing mortgages based on a buyer’s statement of their qualification without checking.
Pugel said as home prices soared and more homeowners got introductory rate mortgages, the market was bound to pop.
As subprime mortgages reverted to regular interest rates, homeowners found themselves forced into foreclosure.
In the Rim Country, from 1997 to 2005 new projects were popping up everywhere. Chaparral Pines and The Rim Club, took root and began building multi-million dollar homes. Now, construction in The Rim Club has all but stopped.
Lots that once were sold for $160,000 are now selling for $30,000. And a home that was valued at $2.5 million in 2005 is now listed for $700,000.
“I don’t tell you this to depress you, but it is reality,” he said.
Want to sell your home? Pugel said price it at 2003 values.
“To sell a home you are going to have to be below the lowest priced home that is comparable in the area,” he said. “There is no way around it.”
So how do we get out?
To fix Payson’s real estate predicament, residents need to look to commercial development. When commercial properties are filled with viable, thriving businesses, real estate prices will recover, he said.
“We are not isolated from businesses as homeowners,” he said. “They help set property values.”
However, back in 1997, the town was scaring businesses off, telling them the town was out of water and forcing them to undergo a humdinger of a process to get licenses and permits. “Those were some frightening years here,” Pugel said.
At the time, many residents compounded the problem by saying they didn’t want commercial development, preferring to keep the town’s small-town appeal.
Businesses carry the tax base and without them, a town dies. Pugel said he watched two towns die, including Needles, Calif., because town officials and residents refused to grow.
In the last 10 years, Pugel said he has seen a positive change in business development. In the last year, the town and sanitary district have even instituted changes to make it more affordable and easier to open a business. New businesses such as Mattress Experts, My Sister’s Bakery, Wear This and China Wok are helping carry the tax base.
Currently, Walmart pays $180,000 in property tax a year, Home Depot, $120,000 and Coldwell Banker Bishop Realty, $22,000. Walmart’s payment is the equivalent of 200 homeowners.
Even with new businesses, Pugel said property values would not recover until the town is cleaned up. Drive through town “with your eyes open” and you see auto title loan shops, empty storefronts and run down businesses. All these things scare off potential buyers.
“The appearance of Payson when you come into town has changed in the last 10 years,” he said, pointing to for rent commercial properties during a PowerPoint presentation. We have lost the fudge shop, coffee shop, two sawmills and a Hallmark, just to name a few.
“These commercial vacancies have an impact on residential property values. We need to start staging the town.”
Just like staging a home for selling, businesses need a fresh coat of paint, new signs and overall curb appeal. “The Swiss Village looks old and tired,” he said.
Pugel believes with improved curb appeal, government practices and an ASU campus, new businesses will come.
“When the economy does change, property values should come back.”