Now in its 12th year, the Forty Under 40 program puts the spotlight on Uta...Read More
Home Away From Home
Full Steam Ahead
Under Lock and Key
Going to Pot
Building and Construction
Salt Lake Area
The economists at Zillow, Inc., which operates the largest home-related marketplace on mobile and the web, predict Salt Lake City will have the hottest residential real estate market in the country for 2014, ahead of metros like Seattle, Austin, San Jose and Miami.
Dave Anderton thinks the Zillow prediction is a year late.
“2013 was our best year in seven years,” says Anderton, communications director at the Salt Lake Board of Realtors. “But the national ranking tells you we are in a good place now.”
That’s not to say 2014 won’t be a great year for real estate, but realtors think in terms of home prices and units sold—and in those two areas, 2013 was an incredible year. Utah experienced a 13 percent jump in the median price of a home and a whopping 35,253 units sold statewide.
“That’s the best it’s been for units sold since 2006,” adds Cal Musselman, president of the Utah Association of Realtors. “That’s a lot of units sold. It’s good for the state; it’s good for the real estate market and for the economy.”
Overall, Utah experienced a 10-percent increase in units sold over 2012. In Salt Lake County, home values jumped 15 percent while home sales for all housing types jumped 9 percent. The spring of 2013 saw a home buying frenzy in some Utah markets, with multiple buyers in bidding wars for the same properties. It was a crazy time, with interest rates in the 3 percent range, low home prices and extremely low inventory.
“People had to hurry if they were going to get in the home they wanted,” says Anderton. “And when the sellers saw they were getting three and four offers for their properties, they thought, ‘If the demand is this high, I am going to raise my prices.’ Word got out that the market was back and prices went up.”
Musselman says there was also some “buyer’s shock” that accompanied the frenzy because buyers wanted to offer 10-20 percent less than sellers were asking.
“In reality, if their offers were more than 3 percent less than the asking price, they would miss out,” he says. “It was a bit of a shock to realize they had to dance to the tune of the sellers after being in a buyer’s market for two and a half years.”
Hitting the Brakes
The market settled down as the year progressed, but remained strong across the state for most of the year. The greatest weaknesses were in the rural areas of the state still trying to recover from the economic woes of the recession, while the hottest markets were in Summit and Washington counties.
Utah was on pace to hit 40,000 units sold, but sales dropped off in the third quarter of 2013.
A seasonal decline is typical, but Anderton believes the decline could be the start of a trend. “October was the first month we saw a drop in the number of units sold on a year-over-year basis,” he says. “It was the first month we had seen a decrease in almost two and a half years.”
Anderton blames the decline in units sold in the last quarter on the price gains the market experienced over the past 18 months. “Prices came crazy back, especially in 2013, to where they are almost overpriced now,” he says. “The surge priced some people out of the market. Now, sales are falling off but prices have remained high and interest rates have gone up.” He notes that inventory has increased as well.
Musselman says the increase in inventory is a good side effect of the increase in home values. “We will see more sellers come off the sidelines now that values have increased and there is enough equity in their homes to make a move upwards.”
However, the combination of interest rates in the 4.5 percent range (which is still a great rate, say the realtors), more inventory on the market and home prices that are $30,000 to $40,000 more than they were six months ago may be causing buyers to take a breather.
“They are saying, ‘Hey, I’m going to take my time, I am not going to jump in and buy right now,’” says Anderton.
The median home price for all housing types statewide was $205,000 in 2013, up 13 percent compared to $182,000 in 2012. In Salt Lake County, the median home value is about $225,000. Anderton says about 75 percent of the homes in the county sell below $300,000 and when home prices push above the $300,000 threshold it prices the average family out of the market.
“The median household income in Utah is about $60,000. When you get home prices pushing above $300,000, people just can’t qualify for a loan under today’s mortgage guidelines,” he says. “Utahns have big families and prices can only go up so much before you price them right out of the market.”