SALT LAKE CITY — The new year may mean a new beginning for the Utah housing market.
Home prices are expected to build during the next two years, increasing slowly in the first half of the year and accelerating during the second half of 2013 and into 2014, according to an analysis of indexes from Fiserv Case-Shiller, which measures the average change in home prices in particular geographic markets.
Its indexes, which measure sales on single-family properties, predict that Utah home prices will increase nearly 7 percent from mid-2013 through the second quarter of 2014, David Stiff, chief economist for Fiserv Case-Shiller, said.
“The real estate market in the spring and summer of 2012 was the strongest since the peak of the bubble,” Stiff said. “There is now strong evidence for a slow, sustainable recovery on both the supply side and the demand side.”
Although Fiserv reports that some economic obstacles could stall short-term appreciation, Stiff said the housing market recovery will likely continue during the second half of 2013.
“There has been a transition recently from a market that is dominated by foreclosure sales to a market where the majority of sales are traditional,” he said. “The consequence of that is a big jump in prices because you don’t have foreclosed properties putting downward pressure on prices.”
That transition has already taken place in other Western metro markets like Phoenix and Las Vegas, with Salt Lake City joining the trend in 2013, he said.
“Salt Lake City is going to have a bigger rebound than the U.S. (average) because it’s going to make this transition out of a foreclosure-dominated market into a normal market,” Stiff said.
The result would be an estimated 7 percent jump in housing prices statewide compared to about 3 percent overall for the rest of the nation, he said.
Stiff also noted that price stabilization nationwide began to take hold last summer and markets have began “slowly rebuilding.”
“Housing affordability has never been better and the Federal Reserve’s third round of quantitative easing should keep mortgage interest rates low for at least another two years,” a Fiserv statement said.
“Following the 2012 presidential election and the resolution of the fiscal cliff, overall economic growth is also expected to accelerate,” Stiff said.
As consumer confidence improves and people become convinced that home prices have stabilized, demand from first-time and trade-up buyers will return to normal, ensuring a sustained market recovery, he added.
In his blog, Freddie Mac chief economist Frank Nothaft wrote that interest rates would likely remain near their 65-year lows during the first half of the year, while rates would rise in the second half of 2013 but remain under 4 percent.
“In the single-family market, this means homebuyer affordability should remain very high in 2013 for those with good credit history, stable income and sufficient savings,” he wrote.
The forecast from other agencies is similar:
• The National Association of Realtors is predicting an average rate of 4 percent on 30-year fixed-rate mortgages with a 5 percent increase in prices. Some areas of Utah may be far less, however.
• Freddie Mac officials said home prices would rise 2 percent to 3 percent this year.
“Like always, national statistics don’t tell the full story,” Nothaft wrote. “Some regions will post faster house price gains, while some will be stagnant or see value loss in 2013.”
As for Utah and its metro areas, housing prices have likely seen their bottom levels in 2012.
“We hit the trough in January of 2012,” said Cal Musselman, president of the Utah Association of Realtors. “We’ve had eight months in a row of increased equity.”
He also noted that sales have increased for 18 consecutive months in Utah, signaling growing stability in the state’s housing market. Currently, the market has an estimated 5.7 months of available inventory for sale — another indicator of market strength.
Six months of inventory is considered “the definitive line between a buyers’ market and a sellers’ market,” Musselman explained.
He said conditions are currently very favorable for a significant improvement in the area housing market.
“We think we’ll see more people entering the market,” he said.
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