Salt Lake Real Estate Number One!
This year has quickly passed us by and with the release of 2nd quarter house values today, I thought I’d revisit some of the predictions I made in January about the Utah real estate market.
Back then, a CNN article predicted that in the West, Albuquerque would be the highest city with appreciation. Year to date, it’s Salt Lake City.
The CNN and Moody’s article was very conservative, showing a high single digit appreciation rate in Salt Lake. I was a little more optimistic with a low double digit increase of 10-12%. Current numbers year to date show appreciation in Salt Lake in the low 20% range. In the second quarter, Salt Lake led the nation in both single family homes and condos with 21.9% appreciation.
What gives? Housing bears and commenters on this site
have stated over and over that Salt Lake is no different than the rest of the country and soon we would be seeing a housing decline of proportions similar to the rest of the country. They’ve been saying this for a year now, yet the market continues to surprise.
Why? My opinion is that while the super bubble cities in this country were seeing appreciation rates in the triple digits, Salt Lake’s was a measured increase driven by real demand. In 2005 and 2006 demand for new housing in this valley was caused by many of the specuvestors who drove up prices in Las Vegas, Phoenix and California. Knowing the potential for harm and facing a huge demand for labor and raw materials, many builders simply cancelled the sales and didn’t try to grow too fast. Most of the planned communities like Daybreak, Suncrest and Traverse Mountain have anti-investor clauses to prevent non-owner occupied transactions from occurring.
Besides reducing the number of investment sales for new properties, demand in Salt Lake for housing has been driven by a shortage of available properties in desirable areas and strong economic growth. Employment growth continues to hold steady at a strong pace according to the most recent reports. Unemployment has dropped even further to 2.7%.
“Utah continues to have a really, really strong economy,” Mark Knold, chief economist for Workforce Services, said Tuesday. “What impresses me is that our job growth is staying so high. Utah just doesn’t seem vulnerable to the things that are affecting other parts of the country right now.”
In much of the nation, a downturn in residential real estate markets is dragging down economic growth and job creation. But in Utah, an increase in commercial construction is “more than compensating for the drop in residential construction,” Knold said.
Yes, there is a tightening of subprime lending and while it will exclude some borrowers, the vast majority of potential homeowners can still get mortgages. In the face of a tightening lending cycle, Salt Lake’s home appreciation is proof of this. But don’t think Salt Lake is special, consider the 2nd quarter numbers show almost 2/3rds of all metro areas seeing appreciation gains.
Despite the continued drop, NAR’s senior economist, Lawrence Yun called the results, “encouraging.” 97 of the 149 metro areas surveyed recorded year-over-year price increases.