Local market news
Local papers such as the Deseret News and Salt Lake Tribune often offer real estate industry perspectives and local market data. Whenever possible we will include this data here or provide a link to the paper's article directly.
Utah R&I Properties has always believed that Utah's Real Estate boom is somewhat autonomous from the Nation's success and its subsequent "bubble bust". Unique market conditions such as population increases, lifestyle, industry growth, low unemployment and undervalued properties puts Utah in a very unique and profitable position. A position ideal for investors and home owners for years to come.
This recent article in the Salt Lake Tribune outlines this belief perfectly.
Utah escapes U.S. housing balloon
Despite rapidly increasing prices, the market is not as overvalued as you might think
Just one year into Utah's real estate boom, a growing number of homeowners and investors already have made some serious money. Mark Knold, senior economist with the Utah Department of Workforce Services, said Utah's home-price run-up, like the one that occurred in the early to mid-1990s, is driven in great part by the state's strong employment growth. Although Utah's economy has all the components needed to sustain a hot real estate market for what could be years, there are some factors that could slow things down.
Those with properties in the Sugar House area in Salt Lake City, for example, saw median selling prices rise by one-third, to nearly $280,000, in the first three months of the year, compared with the same period in 2005. Selling prices in Hooper in Weber County jumped 40 percent, to $230,000. Think that's crazy? How about the Alpine area in Utah County, where prices are up an unbelievable 57.2 percent, to $529,000 from last year, according to home-sales statistics from the Salt Lake Board of Realtors.
Just how long can the party last?
A lot longer than you might think. Economists and people who make their living in Utah's residential real estate industry are betting the state's housing market will be hot for some time. And many believe even with the strong home price gains of the past year, the housing market probably will still appreciate for years to come.
"Most people in Utah should not pay much attention to all the talk of a housing bubble," said Richard DeKaser, chief economist for National City Corp., which compiles quarterly a "House Prices in America" report that analyzes housing values nationwide. "Housing markets in most parts of the state are fairly valued, and not only is there little risk of prices declining but it is very possible that prices could continue to rise for some time."
National City's report assesses the real estate markets in 317 metropolitan areas based on key factors such as median sales prices, median income, population and historic values. In other words, can people living in those markets afford the houses that are for sale there?
Although its latest report covering the first quarter of this year notes that prices in the St. George area are "extremely overvalued," the other major Utah markets in the report - Salt Lake City, Ogden and Provo - are fairly valued, DeKaser said.
According to the report, median home prices in St. George rose to $239,200 in the first quarter, up from $138,500 just four years earlier.
"It's not to say prices are set to decline in that area, but the degree of overvaluation in St. George today is consistent with other extremely overvalued areas that have had price corrections in the last 20 years," DeKaser said.
Ogden was considered to be the most affordable of all Utah cities, ranking in the top two-third in terms of affordability among all cities in the report. Even Salt Lake City, deemed to be 8 percent "overvalued" and Provo, 11.9 percent overvalued, are considered to be "fairly valued." DeKaser said any metropolitan area in the report between 13 percent "undervalued" and 13 percent "overvalued" should have few worries about a sharp home-price correction.
Still, homeowners such as Shannon Harrison can't help but thinking how long it all can last.
Harrison, said some people are shocked to see just how much prices have risen in Santaquin, where she is asking $208,000 for her 2,460-square-foot home.
"They expect because we're so small the prices will be lower," she said.
But according to data from the Salt Lake Board of Realtors, tiny Santaquin in southern Utah County is catching up. Prices in the Santaquin area have risen nearly 25 percent, to $170,000, from the first quarter of 2005 to the first quarter of 2006. Harrison said she wants to buy a home in the American Fork-Lehi area, where prices also have jumped over the past year.
"It's just crazy right now." But overvalued? "I don't think so - not yet," said Harrison, who has lived in Utah for more than two decades.
So where are the most overvalued areas nationally? Naples, Fla., estimated to be overvalued by 102.6 percent, followed by Salinas, Calif. (79.1 percent) and Port St. Lucie-Fort Pierce, Fla. (77.4 percent)
The most affordable? College Station-Bryan, Texas, deemed to be 23.7 percent "undervalued," followed by Dallas, Fort Worth and a host of other Texas cities.
Scores of people are moving to Utah, where employment growth is above most other states. Many have sold homes in other hot real estate markets and in Utah have enough money to buy a bigger house in a better neighborhood with more amenities. Many people in that situation are not as motivated to haggle over the selling price, which tends to further boost overall appreciation in the area.
One important factor is mortgage rates, which are marching toward 7 percent, after reaching a low near 5 percent just a few years ago. But many economists predict that mortgage rates will plateau in coming months and even decline by next year.
Another potential factor in a slowdown in some other hot real estate markets such as Phoenix and Las Vegas is that prices have risen to a level at which many buyers are priced out of the market.
"Housing prices can only go so far before they are outrunning the ability of local people to afford them," Knold said. "You just can't double the price of a house in three years and expect that to continue and be the norm and have people still be able to buy."
Knold said that in Utah, strong employment growth has pushed some wages higher, which means more people can afford to pay the higher-price houses. More jobs, higher wages and strong in-migration of people from other states all set the stage for some strong gains in real estate values for some time to come.
"Will it be years?" Knold said. "I don't think anyone knows at this point."
But many people are counting on it.
Residential real estate investor Murray Dallin Wall, like many investors in the Utah market, scoffs at the idea of the Wasatch Front becoming truly overvalued anytime soon.
"I think the St. George area is just about the only area that doesn't have a strong upside potential," said Wall, a member of the Utah Creative Real Estate Investors Association, an organization of people who buy real estate as an investment.
Still, he said, the strong appreciation of the past year along the Wasatch Front has caused many investors to drift to the outlying areas of the Salt Lake Valley and surrounding counties for the biggest upside potential.
"A lot of investors are looking in areas like Herriman, Highland, Lehi," he said. "And I see people moving more into Davis County and Weber County, as well."
Wall said he has begun scouting for investment properties in Weber County, which in recent years has trailed most other areas in appreciation. Housing prices in most Weber County cities also are much lower than most other areas along the Wasatch Front.
Jaren Davis is another involved in real estate who thinks Utah homeowners will be rewarded in the coming years.
The vice president of Coldwell Banker Utah in Salt Lake City said one key is looking at prices in Utah compared with other states.
While other parts of the West such as Arizona and Nevada saw housing sales and prices skyrocket for much of the late 1990s and into the early 2000s, Utah had little or no appreciation during that time, he said. As a result, real estate in the Beehive State remains affordable, relative to much of the rest of the country, Davis said.
"Here in Utah, many people consider Park City [not included in the National City report] and St. George to be 'overvalued,' " he said. "But on a national scale, even Park City and St. George are still affordable. Utah is absolutely poised for a sustained period of appreciation."
lesley@sltrib.com