2011-09-21
Real Estate Sales Rebound In Salt Lake
Downtown Salt Lake City. Photo courtesy of Dave Anderton.

The Salt Lake City metro area saw existing-home sales in July surge 34.3 percent from a year ago -- a sign that consumers are growing more confident about the local economy. At the same time, pending sales jumped 37.6 percent year over year.

Still, Utah's state capital and largest metropolitan area continues to experience falling home prices and a glut of distressed properties.

In Salt Lake City, more than 1 in 4 homes with mortgages were either underwater or close to being upside down with negative equity in the second quarter of 2011, according to CoreLogic, a real estate research firm.

Overview

The median sales price of an existing home in the Salt Lake City metro area in July declined 16.3 percent to $189,000 from a year ago despite a double-digit jump in closed transactions, according to the Salt Lake Board of Realtors.

Statewide, the median sales price fell 12 percent to $175,268 in July, according to the Utah Association of Realtors.

The sagging prices come amid a 34.3 percent spurt in home sales in July -- from 752 a year ago to 1,010 in 2011. Pending sales, or those under contract, climbed 37.6 percent year over year, to 1,076.

'We're seeing an uptick (in sales) now. We had a lot stronger summer than we had predicted (earlier),' said DeAnna Dipo, president of the Salt Lake Board of Realtors.

Real estate experts attribute the summertime surge to consumers encouraged by an improving local economy in the past year, record-low interest rates and falling home prices. Realty board officials are projecting a 12 percent increase in year-end sales. A big cloud, though, continues to hover over the housing market. Foreclosure activity remains a significant factor, with distressed property sales by most estimates representing about a quarter of all sales.

Inventory remains tight. In July, there were 7,009 homes on the active market in the region, down 20.3 percent from a year ago. The average number of days on the market rose 5.6 percent, to 80 days the previous year. There were 8.1 months' supply of inventory.

Local real estate professionals say many homeowners are opting to remodel their current homes or are waiting for prices to firm up before putting up the for-sale sign.

However, realty board officials consider the low inventory a positive sign. A tighter supply, coupled with increasing buyer demand, could help reverse the slide in home values. Area home prices have declined annually since peaking at $220,599 in 2007.

'I really think our pricing has bottomed out,' Dipo said.

Salt Lake City home values are faring better than the rest of the state and the nation as a whole. The Federal Housing Finance Agency's Housing Price Index reported second-quarter home prices in the Salt Lake City area fell 5.2 percent in the past year, compared with an 8.6 percent drop statewide and a 5.9 percent decrease nationally.

Experts predict the price decline will continue through the winter, and by March 2012 home prices are forecast to be down 2.7 percent year over year, according to the Fiserv Case-Shiller Indexes.

But Fiserv analysts anticipate that prices will rebound in the following 12 months, increasing 2.7 percent by first-quarter 2013.

The Salt Lake City Chamber of Commerce projects a 3 percent decline in prices this year, according to its 2011 Economic Outlook report released in May. 'It is probable that 2012 will see the first increase since 2007,' chamber researchers said.

Like other growth markets in the 2000s, the Salt Lake City market was hit hard by the foreclosure crisis. Last year, one in every 27 homes received a foreclosure notice in the Salt Lake City area, which ranked 34th among major U.S. metro regions, according to RealtyTrac. That was a 29.9 percent increase from 2009 and a 123.7 percent surge from 2008.

'Like every place, the lending was too loose. There are a lot of homes that need to go through the process,' said Charlotte Thomas, associate broker at Keller Williams South Valley Realty.

During the second quarter, 1 in 5 homes with mortgages (45,180) in Salt Lake City were underwater, meaning the borrowers owed more on their mortgages than their homes were worth, according to CoreLogic. Another 6 percent, or 13,622 homes with mortgages, were near negative equity. Overall, Utah ranked 13th highest nationally, with a rate of 20.9 percent.

Real estate brokers estimate distressed properties today account for close to 40 percent of the active listings.

Thomas doesn't expect the distressed properties to further erode home values. 'The REOs here have slowed down. They (lenders) are trying to do more loan modifications and short sales. They are not going to flood the market.'

Indeed, August foreclosures plunged 49.1 percent year over year, with 1 in every 426 households receiving notices, RealtyTrac reported. Statewide, foreclosures tumbled 48.3 percent from a year ago. Still, Utah's foreclosure rate -- 1 in every 450 units -- ranked 10th highest in the nation.

One positive sign for the housing market: The average sales price of bank-owned homes rose in the second quarter to $208,909, up 3 percent from the year-ago period, according to RealtyTrac. By comparison, the average sales price for all homes in July was $222,009, SLBR statistics show.

Nationally, the average sales price for bank-owned properties fell 4.7 percent in the second quarter.

'It seems like we're at bottom and bumping along right now,' said Butch Dailey, broker and co-owner of Re/Max Associates. 'If we can bump along the remainder of this year and through market, I think we can see a measurable pick up. It all goes back to people having confidence in the market and optimism moving forward.'

From a broad perspective, Salt Lake's housing market has been on a roller-coaster ride during the past decade and a half. Home sales followed a steady upward track from 1997 through 2005 and 2006 -- when sales those two years topped 23,300 units. Sales then plunged 23 percent in 2007 and dipped another 1.6 percent in 2008 before increasing the following year, according to SLBR statistics.

Dubbed the 'Crossroads to the West,' Salt Lake City should be in a good position to take advantage of the housing turnaround. As host of the 2002 Winter Olympics, the region is well-known for its world-class ski resorts and as the gateway to renowned national parks. It has highly regarded universities and a young, educated workforce that has attracted such high-tech companies as eBay.

Clearly, the recession and foreclosures have hurt housing sales. In 2009, for example, Salt Lake County lost 30,000 jobs -- nearly doubling the area's jobless rate -- and had more people moving out than moving into the county for the second straight year.

Since then, migration returned to the positive side, with the region netting an additional 1,100 people a year.

Another encouraging economic sign is projected job growth. The Salt Lake Chamber forecasts employers will hire 13,100 extra workers this year and create 14,100 new jobs in 2012.

'In spite of the current challenges to the economy, Salt Lake's outlook remains positive and will continue to outperform the national average,' according to the chamber's 2011 economic forecast.

'We have a lot of new businesses coming in,' Dipo said. That bodes well for the economy and the housing market. 'We're going to keep things moving at an even pace.'

Market Data

Salt Lake City metro area  
Population (2010) 1.12 million
Population growth (2000-10) +16%
Total closed sales (2010) 10,362
% change closed sales (2009-10) -8
% change closed sales (July 2011 vs. July 2010) +34.3%
Sales per person 2010 1 in 108 people
Median sales price (July 2011) $189,000
% change median sales price (July 2011 vs. July 2010) -16.3%
Foreclosure activity rate (August 2011) 1 in 450 housing units
% homes affordable to median-income
households
79%
% unemployment (July 2011,
not seasonally adjusted)
7.5%
Walk Score 57.6

Sources: U.S. Bureau of Labor Statistics, Salt Lake Board of Realtors, RealtyTrac, Walk Score, National Association of Home Builders/Wells Fargo, U.S. Census Bureau.

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