SALT LAKE CITY — After a summer of brisk activity in the local housing market, a bump in interest rates and a seasonal slowdown have cooled the market and left would-be buyers and sellers trying to assess just where the market is headed.
The percentage of Americans who own a home is at 65 percent, its lowest rate since 1995, a measure of the lasting impact of the housing bubble that pushed uncertainty into the family living room.
But strong sales volume along with growth in median home values through the summer has Utah Association of Realtors President Cal Mussleman describing the state of the market as "healthy.”
He said monthly sales have increased on a year-over-year basis for 24 straight months. From January through August, sales jumped 14.2 percent over the same period last year. Nearly 4,000 properties sold during the month of August and September numbers, once tabulated, could extend the monthly year-over-year streak.
“It’s still (a hot market), just not boiling,” he said.
Recent trends indicate that sales of existing homes have been strong and new home construction is increasing as well, according to Jim Wood, director of the Bureau of Economic and Business Research at the University of Utah.
“We expect this year that residential sales will be close to what they were last year. In addition, home values are likely going to increase,” he said.
That is good news for home sellers like Aaron Johnson, 29, of Lehi. When he and his wife bought their three bedroom, two bathroom home in 2010, they only had one child. The couple is now expecting their fourth child and has recently decided to sell in an effort to accommodate their growing family.
“We noticed (this spring) people in our neighborhood selling their homes for really high dollar amounts,” he said. “So we thought we would try to take advantage of the market.”
The house has been on the market since early August and received a fair amount of interest initially, but has yet to sell. Johnson said the market has cooled a lot and fewer houses in their area are selling compared to a few months ago.
While he is disappointed that their house has not sold, he is hopeful that it won't take too long. He said he is willing to take it off the market if they haven't received an offer by the time their baby is born.
"Then we'll pick it back on the market in February or March, depending on how the market is looking at the time," he said.
Newlywed Armando Villagrana, 20, and his wife, Charnell, 19, have spent the past five months looking for their first home in the southern part of the Salt Lake Valley.
He said now is an opportune time to purchase their first place.
"Right now is the time to buy," he said. "Interest rates are really low and there are a lot of houses for sale."
The couple have already visited more than 20 properties and are optimistic they will eventually find the right place.
Salt Lake County
In Salt Lake County, 1,411 homes and condominiums were sold in August, up less than 1 percent compared to August 2012. According to data from the Salt Lake Board of Realtors, about three of every four homes sold in August sold for less than $300,000. The slight uptick in August sales was in sharp contrast to previous months that posted double-digit year over year sales gains.
Across the state, the median price of homes sold for the 12-month period ending in August 2013 was $199,011 — up 13.7 percent from the previous year. So far this year, the median sales price of $205,000 was more than 15 percent higher than at the same time last year.
“Sales are back at 90 percent of where they were before the (housing) crash,” Wood said. “Prices aren’t all the way back yet, but they are getting very close.”
The median price of homes and condos sold in August in Salt Lake County increased 13 percent to $232,000 compared to a median price of $205,250 the same period of 2012. Year over year home prices countywide climbed for 17 consecutive months.
Those increasing prices along with rising interest rates impacted homebuyer attitudes, according to Dave Frederickson, president of the Salt Lake Board of Realtors.
“Since April 2012, Salt Lake area home prices climbed 32 percent,” he said. “Combined with nearly a one percentage point increase in mortgage interest rates since last year, some consumers are taking a wait-and-see approach.”
Based on recent sales trends, Salt Lake County currently has a 5.1-month supply of housing inventory. A seller’s market, one in which there are more buyers than sellers, is typically characterized by housing inventory levels below a four-month supply while a four-month to six-month supply of housing inventory is considered a normal market.
In neighboring Davis County, home prices increased 7 percent in August, while sales climbed 8 percent over last August.
Nationally, quarterly homeownership data released by the Census Bureau showed a raw homeownership rate of 65 percent was unchanged from last quarter and 0.4 percent lower than a year ago.
Along the Wasatch Front, the median single-family home price in Salt Lake County increased to $249,700, up 17.2 percent in the second quarter of 2013, compared to $213,000 during the second quarter of last year. Neighboring Davis County saw its median home price climb 7.6 percent during the April to June period. Utah and Weber counties experienced double-digit gains at 12.6 percent and 13.8 percent respectively. In Tooele County, home prices climbed 14 percent.
The top three highest-priced sales areas along the Wasatch Front in the second quarter were Alpine (ZIP Code 84004) at a median price of $529,000, up 27.3 percent; Holladay (ZIP Code 84117) at $412,650, an increase of 11.5 percent; and Draper (ZIP Code 84020) at $409,900 — up 25.0 percent.
“Home prices in the Salt Lake area are approaching the same values as seen in the summer of 2008,” Frederickson said. “New listings in the second quarter in Salt Lake County increased 22.7 percent.”
The number of single-family homes sold by a Realtor in Salt Lake County for the second quarter climbed 12.2 percent compared the second quarter of 2012. Condominium sales in the Salt Lake area also rose 25 percent year-over-year, with the median condo price increasing to $170,000 — a 21.4 percent jump in value over a year ago.
Interest rate impact
Homebuyers in the Salt Lake area in August pulled back due to rising interest rates and steeper prices, according to Rex Rollo, executive vice president and chief financial officer at America First Credit Union. Despite the slow down, he said demand for home loans has remained strong.
“As we look out in the future pipeline for mortgages, we see that refinance mortgages have (declined),” he explained. “But we still see the purchase side being very active.”
Rollo estimated that refinance loan volume has decreased by 30 percent since interest rates began to rise in May. However, applications for home loans have remained constant over the same period, he added.
“Because rates went up a little, it took some enthusiasm out of the market,” Rollo said. “But we still have people who have been waiting to get into a home.”
While demand is still relatively high, potential buyers now need to be more patient during the process due to stringent regulatory standards imposed following the mortgage meltdown, explained Bank of Utah chief financial officer Branden Hansen. Recently enacted rules are aimed at preventing abuses that occurred previously, he added, but make the process more cumbersome and time-consuming for lenders as well as borrowers.
“It’s a very different environment than before and everybody has to cope with it,” he said.