The Big Picture of the Salt Lake County Housing Market Recovery:
The value of single family homes and condos in Salt Lake County has been increasing since the Spring of 2012. In 2012, the median sold price for a single family home in Salt Lake County went up by 6.5%. In 2013 the increase was 15.6%. It’s about time!
To fully understand how the recovery occurred, we’ll go back in time and briefly look at the major events that caused the decline. From the boom, through the decline, to the current recovery:
The boom of 2005 to 2007:
- By 2005, lending institutions had made it easy for buyers to qualify for a mortgage offering subprime and zero down loans. More buyers qualified and the demand for homes increased.
- Net migration in Salt Lake County (the number of people arriving vs. leaving) surged during 2005 & 2006 with a total of +14,828 more people coming to than leaving. This was huge!
- Unemployment was running very low between 2 and 4%.
- In the three years from September 2004 to September 2007 Salt Lake County home values increased 51%.
The decline begins in the second half of 2007:
- In 2007 net migration turns negative to -3,717. This trend continues with total negative migration of -8,647 from 2007-09.
- During the summer of 2007, subprime lenders are in financial trouble. This leads to a trend of increasing lending standards, which decreases the number of buyers who qualify for loans and the demand for homes.
- Salt Lake County home builders continue to build in 2007 like the demand for their homes will never end. By September 2007 housing inventory balloons to 8,775 homes for sale. Only 31% of them sell, a record low. In fall 2008, 39% sell, second lowest. The 3rd quarter average since 1998 has been 55%. In 2005 it was 76%
- In November 2008 unemployment in Salt Lake County is at 2.9%. Four months later in March of 2009 it has risen to 7.2%. By 2010 unemployment peaks at 8.4%.
- The federal government offers first time home buyer incentives during 2008, 2009 and 2010 to stimulate the sale of homes.
The Salt Lake County housing market hits the bottom in 2011 and a recovery starts to form in 2012:
- Net migration turns slightly positive in 2010, up +1,624, then +214 in 2011 and +900 in 2012.
- Unemployment peaks in 2010 and then starts to decline:
- November 2008: 2.9%
- March 2009: 7.2%
- January 2010: 8.4% (peak)
- January 2011: 7.5%,
- January 2012: 6.0%
- January 2013: 5.3%
- January 2014: 4.5%.
- By the fall of 2011, Salt Lake County housing prices were at their lowest level since the spring of 2005 and 20% of the homes in Utah had negative equity.
- Apartment Rents increase by 4.7% in 2010 and 8.0% in 2011. Now both renters and investors have more incentive to buy.
- Housing inventory decreased during 2011, especially in homes priced under $200,000. This was partly brought on by a number of hedge funds that purchased hundreds of homes in our area and many flippers and investors buying homes too.
- During 2012 and into the spring of 2013, 30 year mortgage rates are hovering around 3.5%, the lowest rates since the 1950s.
- During the 3rd quarter of 2012, 77% of the home listed for sale in Salt Lake County, sold which is the highest it’s been since 1998.
- Salt Lake county home prices increase 6.5% in 2012.
The market surges in the first half of 2013:
- Unemployment reaches a 5 year low of 4.5%
- 30 years mortgage rates hover in the 3.5% range until May 2013, then rise to a range of 4 to 4.7% for the rest of the year.
- Net migration in SL County is estimated at +1,900 for 2013.
- By the second half of 2013, just 8% of home owners have negative equity. It was 20% two years before in 2011.
- Home prices sag slightly in the second half of 2013 due to slightly higher interest rates, the sequester and government shut down.
- 67% of the homes listed for sale, sell, in the third quarter of 2013. This is the third highest this percentage has been since 1998.
- Even after the slow down in the second half, home values still climb by 15.6% in 2013.
That’s the story with all the big events. I’m optimistic about the 2014 spring housing market in Salt Lake County. Housing inventory continues to be low, unemployment continues to decrease, rents are at all time highs and interest rates are still historically low.
Today interest rates have dipped into the low 4% range for a 30 year conventional loan, which is the lowest it’s been since June 2013. The Salt Lake Board of Realtors predicts an increase in home values of 5 to 7% for 2014.
