After being flat-lined for the last two years, the real estate market in Utah is slowly showing signs of life. A resuscitation of housing sales during the first quarter of 2010 might finally indicate a recovery—albeit a minor recovery—for the real estate industry across the state. With sales up and pressure from foreclosures keeping prices low, could this be the year housing can start to rebound?
According to Jillinda Bowers, past president of the Salt Lake Board of Realtors and associate broker with Prudential Real Estate, residential home sales in the Salt Lake Valley were up significantly compared to the first quarter of 2009. Midvale reported an increase of 72 percent, Taylorsville was up 54 percent, Sandy improved by almost 50 percent and homes on the west side of Salt Lake saw an increase of 122 percent.
Nearly 8,000 homes are available in Salt Lake County (10,500 on the market statewide) with those priced under $300,000 showing the best results and fastest sales. Bowers says, on average, homeowners can expect to sell their homes within 130 days.
“Sales are on the rise,” Bowers says. “Consumer confidence is coming back. Every zip code in the Salt Lake County has experienced an increase. We should see that through the summer the market should be good. The market in May slowed down with people regrouping and waiting for school to get out. Summer is historically slower, especially July, but we should see good healthy sales.”
Demand Slowly Increasing?
Because so many Utah residents lost their jobs due to economic cutbacks and layoffs, demand for single-family homes was reduced during the last couple of years. People moved in with friends and family, or rented apartments until they could get back on their feet. But now that the economy is showing positive signs, the inventory of homes should provide a great selection for people looking to purchase.
“We’re seeing a strengthening of the single family market and a weakening for apartments,” says James Wood, director of the University of Utah’s Bureau of Economic Research. “For home builders, the first quarter was up by 110 percent. It does appear that sector is picking up.
“I think we’ve seen the worst in both sales of existing real estate and new construction,” Wood adds. “Both of those have reached bottom. It’s going to be another year, or year and a half, then the market will stabilize.”
With the federal and state tax credits for new homebuyers off the table, many real estate professionals are worried that the loss of the incentives will affect home sales. And while nationwide new home construction in April was at the highest level for more than a year, now that the credits are gone, analysts expect new home construction to drop slightly.
Bowers, however, doesn’t believe revoking the tax credit will influence many homebuyers. She cites a recent survey where the reasons people decided to buy a home were the low prices, the low interest rates (hovering at around 5 percent), and lastly the federal and state incentives.
Hard Hit Areas
Southern Utah’s residential real estate market has definitely seen better days, and Wood and Bowers agree that the real estate markets in Washington and Iron counties will take longer to recover due to overbuilding in the area, low home values in nearby Nevada towns, and the depletion of retirement accounts owing to the economic downturn across the country.
“[Older] people just aren’t confident enough in the housing market to purchase a second home,” Wood says. “That hurts the second home and retiree market because their wealth has been damaged a bit. I think that retiree second home market will take a while to recover.”
Even so, St. George properties are starting to rebound, showing a nice resurgence in the region. Once the new St. George Municipal Airport opens in early 2011, economic growth should show a substantial improvement—and the housing market is predicted to take an upturn. But with home prices in Nevada cut nearly in half, retirees might go outside of Utah to purchase their winter home.
Still a Buyer’s Market
With so many homes on the market, Bowers says homeowners should do whatever is necessary to entice buyers. Even though sales are up, prices are still low, so sellers have a lot of rivalry in the marketplace. “They should price competitively, watch the market, do any maintenance necessary (because buyers don’t have extra cash to do upgrades) and help with incentives like closing costs or home warranties.”
In May, the median price of a home in Salt Lake County was between $217,000 and $238,000, a drop of almost 9 percent. The Canyon Rim and Olympus Cove areas have stabilized. The median price in Holladay actually increased more than 25 percent ranging from $266,000 to $327,000 and West Valley showed in increased median price of 6 percent. Salt Lake City home prices showed the biggest decline, dropping by 22.9 percent. As a result, 1,716 homes sold in Salt Lake County between Jan.1 and Mar. 31, 2010 compared to only 1,489 properties sold in the same time period in 2009.
Another positive aspect of Utah’s housing situation is the state’s young population. Historically Utah has the largest number of echo-boomers (20- to 30-year-olds) in the nation. While most states show an increase in baby boomers, Utah’s young population is looking for homes for their families. And although Utah was one of the last states to be affected by the downward spiral of the housing market, with a large inventory of homes available, competitive prices and the new home construction industry slowly gaining ground, Utah analysts are convinced the real estate market will be strong once more.
“I feel that things are on the upswing. There is a better confidence,” Bowers says. “I think if the stock market doesn’t have a big dip, then we should remain pretty comfortable. It’s a great time to buy.”