We at Rize Homesource are optimistic about the strong 2016 real estate outlook after attending the Salt Lake Board of Realtors conference, which has only been validated by findings generated in the conference’s report.
The Salt Lake Housing Forecast, an in-depth analysis put together by James Wood, an Ivory-Boyer senior fellow at the University of Utah’s Kem C. Garder Policy Institute, forecasts an 11% rise in total residential home sales, with single-family home prices increasing by between 5-7% this year to a $290,000 median sale price. Multifamily units may go higher, rising by up to 10%, with a median sale price of $205,000.
Predictions for 2016 are based heavily on 2015 trends. Last year an aggressive real estate market reversed previously distressed inventory, with Salt Lake County properties selling with greater appreciation levels. In fact, existing single-family home sales totaled 13,300 units, the third highest in the county’s history. Demand for multifamily units, including condominiums, townhomes and twin homes, was also through the roof last year, setting an all-time record of 3,800 units and accounting for 22% of all residential sales.
There are a number of factors contributing to a bright picture this year in Utah. A strengthening economy and corresponding high employment rates, along with improving income and wages, has led to a larger than average number of new people moving to Utah. While job growth is expected to slow slightly in 2016 that decrease should be offset by higher rates of net-migration and improving wage rates due to a tight labor market. Big investments in local infrastructure in the Salt Lake City and other large-scale projects in the valley are also contributing to a promising forecast for the real estate market.
While a strong market outlook typically translates on the surface to positive news for people selling their homes, there are also benefits for homebuyers, such as favorable mortgage rates that remain historically low despite a recent increase in rates by the Fed.
Sellers will see profit
First let’s look at the future for those looking to sell a home this spring. Based on 2015 numbers, homeowners, especially those with moderately priced properties, can expect to continue to close quickly in what should remain a strong seller’s market. We know this because homes are sitting on the market for a far shorter time than in the past. Last year the cumulative days on the market (CDOM) median figure was a remarkably brief 21 days for single-family homes and 29 days for multifamily units. To add some perspective, in the middle of the “great recession” of 2009 CDOM on “for sale” homes was four times that—81 days.
Along with strong demand, typically comes the ability to sell a home at a higher price. The median sales price of Salt Lake home increased 6.7% to $272,000 in 2015, and multifamily units up were up 8% to $189,000. This trend appears likely to continue, benefiting not only homeowners hoping to step up to a larger or better-located home, but also those with underwater mortgages. Six year ago, for example, 21% of all home mortgages in Utah had negative equity. Today that figure has dropped dramatically to about 4% of all home mortgages or 15,000 households.
Buyers can benefit, too
First, for those who can qualify, housing is still relatively affordable in Salt Lake County compared to other parts of the country, meaning while sale prices have rebounded, homes are not yet overvalued. Second, while mortgage rates are inching upward, to move between 4 and 5 percent this year, increases are occurring incrementally, allowing buyers to plan for a move. The big picture? Buyers can still take advantage of some of lowest mortgage rates in the last 45 years.
A strong real estate market could be considered a boon for all, as it signifies a healthy local community. Residents considering a housing upgrade, investment, sale or move can all find something to smile about in 2016.