Fear of inflation and higher interest rates will push housing sales up throughout most of the Western United States during the last half of 1988, but Utah remains in an economic "holding pattern" for residential real estate sales.
That's the view of real estate services firm Coldwell Banker in assessing activity so far in the traditionally active summer selling season and in forecasting home sales for the third quarter.Utah's and Colorado's local economies "are no longer depressed," said Tom Griffin, senior vice president of Coldwell Banker's western sector, "but (they) are not yet vibrant."
The rest of the country has no such problem.
"Sales activity far surpassed expectations for the second quarter, traditionally the peak selling period," said Griffin. "We expect the third quarter to be just as strong; there is nothing on the horizon to indicate a slowdown."
Scott Webber, CB's Utah district vice president, said he expects Utah's relatively "soft" housing market to continue through the year.
"While conditions remain challenging for sellers, Utah is fortunate to have comparably affordable prices," said Webber. "Together with low interest rates, ownership is still within reach for many Utahns."
Affordability of housing has reached crisis proportions in many areas of the country, particularly California where the median price of a house increased 13.4 percent in the past year to $160,073, nearly double the national average of $88,600. Only 28 percent of California households can now afford a median priced home.
But even though Utah is not pacing the West Coast, things are looking up on the home sales front, at least for Coldwell Banker. The firm's residential real estate arm reports it was involved in 823 residential property sales in the state through June 30, a 21 percent increase over last year. CB's gross dollar volume was up 23 percent to $88.16 million.
Overall, Griffin says he hasn't seen this type of activity in the market since the mid '70s.
"In addition, the small increase in interest rates creates the question of whether rates will go up even more, and fuels buyer frenzy. Buyers feel that if they postpone purchasing now, they will be making an irreversible mistake."
Nationally, strong summer home sales activity is paving the way for a very active fall season, according to Coldwell Banker.
"A stable economy has increased consumer confidence which translates into increased home sales," said Joe Hanauer, chairman and president of Coldwell Banker Residential Group. "The rise in interest rates has also spurred buyers to act now instead of later."
Prospective buyers should not change their home-buying plans even if mortgage rates inch up further, according to Hanauer. "Fixed-rate mortgages have risen about a point recently. The after-tax implication of that, even if the tax rate remains at 28 percent, is only half a point to three-quarters of a point more. And the increasing value of the house more than offsets the additional mortgage expense," Hanauer said.
At the same time, three new elements are likely to increase median prices for existing single-family homes, Hanauer said. New homes coming into the market tend to be larger and more expensive, whereas starter home inventory is increasingly limited. In addition, the price of building materials, as well as land, has begun to rise for the first time in several years, and this will put pressure on home prices across the board.
Coldwell Bankers also notes that luxury, year-round destination resort areas offer special opportunities as well, pointing out that Deer Valley and Park City have properties available for 60 percent of their prices two or three years ago.