It will probably take another two years to have a full recovery in prices in what has been an eight-year journey. Overall, these are the best conditions we've had in many years. —Jim Wood, economist
SALT LAKE CITY — The wild, roller-coaster ride that has been the Salt Lake housing market over the past eight years finally may be starting to smooth out.
"We have a good foundation right now for a good, solid recovery in the real estate industry," economist Jim Wood told an audience of more than 500 local real estate professionals Tuesday at the Little America Hotel.
Wood, who serves as director of the University of Utah's Bureau of Economic and Business Research, presented the findings of the 2013 Housing Forecast to the Salt Lake Board of Realtors. The report is a preview of where Salt Lake's housing sales and prices are headed over the next 12 months.
Salt Lake County's real estate recovery is expected to gain momentum this year due to strong job growth and low interest rates that should boost buyer confidence and housing affordability, Wood said. In addition, home sales and prices also should benefit from the release of “pent-up demand,” he said.
“During the recession, job loss or foreclosure forced many families to move in with friends or family and double up, which in turn reduced housing demand,” Wood explained. “Some of this demand will be restored to the market in 2013. In addition, rising rental rates will prod some renters into home ownership, further expanding the demand for housing.”
Home sales are poised to increase by 15 percent to 20 percent, he said, which should boost area sales to around 13,000 units for the year. Wood also noted that a rebound in condominium, twin home and townhouse sales likely will continue as sales increase from 2,225 units in 2012 to approximately 2,600 units in 2013.
“The affordability of multifamily units will be particularly attractive to many renters and doubled-up families,” he said.
Demand is expected to continue to outpace supply in 2013, putting upward pressure on prices, Wood said. Some of the pressure could be offset by an increase in listings, but presently there is no indication of any listings surge, he said.
If the market avoids the oft-predicted next wave of foreclosures and dodges federal actions that could dampen demand, price increases could exceed the 6 percent gain of 2012 and likely increase at a double-digit rate, according to the report.
“Demand for housing is pushing prices higher,” said Dave Fredrickson, president of the Salt Lake Board of Realtors. “We predict that the median price across Salt Lake County could rise as high as 10 to 12 percent this year.”
The report noted that Utah has experienced 30 consecutive months of job growth. Last year, the state's employment growth rate was 3.3 percent, slightly above the historic annual average of 3.1 percent. The Beehive State currently ranks fifth nationwide in relative job growth, Wood said.
Last year was the first year Salt Lake home prices increased after four straight years of price declines, dating back to 2008. Wood said the good news for area homebuyers and sellers is a clear sign of a statewide economic recovery, with affordability and job growth as the two main drivers of rising home sales.
The last eight years have been a wild ride for housing prices, Wood said.
“From 2004 to 2007, the median sales price of a home increased by a stunning 57 percent. In 2006 alone, prices increased by a near farcical 27 percent,” Wood said.
The rise in prices, however, was short-lived, he noted. By 2008, prices weakened and began a steady decline of about 6 percent annually over the next three years until 2011 when prices declined 9 percent — the second worst single-year decline in housing prices in 60 years.
Prices finally began to turn around in 2012 as the median sales price of an existing home rose 6 percent. Every city in the county, with the exception of South Salt Lake, experienced increases in housing prices in 2012, Wood said, which bodes well for the near-term future in the county.
“It will probably take another two years to have a full recovery in prices in what has been an eight-year journey,” he said. “Overall, these are the best conditions we've had in many years.”