20 July 2009

The state of Utah real estate

 As we celebrated New Year’s Day 2009, many of us were relieved that we were leaving behind a dismal 2008.

 Even so, we had wished we were closer to 2010 and the hopes of a better economic outlook.

Well, we’re halfway there and despite the challenges still ahead, it feels like we’re in a much better place than we were last year or even six months ago.

For Utah Real Estate, in particular, the outlook definitely feels rosier. In fact, some experts are saying the toughest times may already be behind us. A new report, titled “Utah's Homebuilding Industry: Present Perspective, Future Prospects,” suggests the rate of the home building industry’s decline has been slowing of late, the Salt Lake Tribune wrote.

The report’s author, James Wood, director of the University of Utah’s Bureau of Economic and Business Research, said the diminished weakness could signal that Utah is closer to reaching a bottom for this real estate cycle. One encouraging sign is the recent increase in June home sales. For the first time since September 2008, monthly home sales in the four Wasatch Front counties and Tooele were higher than sales in the same month a year earlier. Preliminary numbers show the increase at about 7 percent, but the rise is likely to be higher because sales for the month are still being reported.

 Statewide numbers also show signs that the biggest declines are likely behind us. At the beginning of the credit crunch in September 2007, Utah home sales saw a drop-off of 25 percent. From there, the most significant drop was in first quarter 2008 when sales were down about 35 percent from levels the year before. Since then, however, the rate of decline has slowed, and the upcoming second quarter report is expected to show even more improvement.

Other positive news comes on a national level, where seasonally adjusted existing home sales have increased three times this year, a sign U.S. home sales may have already hit a bottom. Most recently, seasonally adjusted U.S. existing home sales increased 2.4 percent in May, the first back-to-back monthly gain since September 2005.

California has also seen increases in the median price of existing single-family homes for three straight months, good news since California is seen as a barometer for the rest of the country. Of course, prolonged improvement in Utah’s housing sector will depend on how the national economy continues to perform.

The National Association of Realtors is forecasting for the rest of the year that the U.S. economy will begin recovering as stimulus programs start to take effect, credit and banking problems stabilize, and the manufacturing sector improves. NAR expects Utah will follow a similar pattern because the state has been less impacted by the recession. In a recent report, the organization said Utah and its housing markets should participate in a modest housing recovery through the later part of 2009, with somewhat greater potential in 2010. That’s not to say there won’t be challenges ahead. Prices still need to stabilize and a continued rise in foreclosures could put more real estate inventory on the market.

 Another concern is the fact that job growth is not expected to resume until the later part of next year. But in many ways, Utah is still faring better than many states. Our foreclosure rate is less than the national rate, at 2.36 percent compared to 3.85 percent. Salt Lake City had lower exposure to subprime and Alt-A loans, with a share of 14 percent versus 15.5 percent nationally. And Utah’s unemployment rate is only 5.4 percent compared to 9.4 percent for the U.S. Most importantly, Utah buyers are beginning to recognize that now is an ideal time to be shopping for a home.

With the affordable prices, super-low interest rates and government incentives, more people are once again getting excited about purchasing real estate. And that’s the first step to any recovery.

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