Economic expert: Housing market working to stabilize
Economic expert: Housing market working to stabilize
President's Message
Chris Sloan
Home sales and prices in Salt Lake County should see some stabilization by the end of the year and into next year, a local housing economic expert reported on Monday.
James Wood, director of the University of Utah's Bureau of Economic and Business Research, said during an economic forecast presentation on Monday that he expects real estate sales and new housing construction starts to find a bottom in 2009 with a trough in prices following.
"I think we will probably see a little bit more weakness this year in the median price of homes sold, but by the end of the year and into next year, we will begin to see some stabilization in this market," Wood said.
The forecast was particularly interesting because it focused on local data and trends from Salt Lake County. Oftentimes national numbers don't give a clear picture of local conditions, which can greatly vary from those reported for the U.S. as a whole.
To help us predict what to expect for the future, Wood compared today's real estate market to the situation Salt Lake faced in the 1970s. During the '70s, home sales climbed for several years before hitting a peak of 10,000 homes sold. After reaching that peak, it took four years before home sales established a bottom. During that cycle, home sales dropped a total of 55 percent from peak to trough.
Wood compared that housing cycle to the one we're in today, which saw its peak in 2005. With three years of declines behind us, Wood is predicting just one more year of sales decreases.
"I expect it's going to be similar to what we had in the previous cycle, where it was a four-year down," Wood said. "So we're probably in for another weak year, but I don't think it's going to drop like this last year."
So far, sales have already dropped 44 percent compared to the total 55 percent decline seen in the 1970s cycle, he said. That means the market could be approaching a bottom in sales.
On the price side, Wood said home prices along the Wasatch Front are probably down about 5 percent from last year, but he concedes that home price measurements are controversial. Not only do the different organizations that track prices use varying methodologies, but the data only track homes that were actually sold - not those that would have sold a year ago had they been on the market. The types of homes being sold (i.e., lower- or higher-priced properties) also changes over time, which can skew the data as well.
That's why it's more important than ever for consumers to use a Realtor in their real estate transactions. A Realtor can help you know how much to sell your home for, as well as how much to pay for a property. Realtors also have the advantage of being able to monitor inventory levels, which can signal where the market is headed.
"It's important if prices are leveling off, for the consumer - the seller and the buyer - to have an understanding of that," Wood said. "It really does help the market."
Also influencing the housing market in the coming months will be the government's economic stimulus package. In the stimulus bill passed by the U.S. House of Representatives, lawmakers included several measures that would directly benefit purchasers of real estate, such as the elimination of the repayment provision of the $7,500 tax credit and greater access to mortgages through higher limits for FHA and conventional loans.
Other House legislation includes efforts to step up foreclosure prevention and a buy-down program that would further reduce mortgage rates. While these provisions are not yet final, it is likely both pieces of legislation will end up including significant incentives for home buyers.
For more real estate information and updates on market conditions in your area, contact your local Realtor.