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Home sweet home: Utah's residential real estate market.


Utah's Residential Real Estate Market

Economists often look at a state's residential real estate market to gauge economic conditions. When housing is in a slump, the same generally holds true for the economy as a whole, and a dynamic residential market usually indicates an upswing.

If such is the case, Utah's economic horizon looks increasingly bright. Residential real estate sales are on the rise in the vast majority of the state's markets, with some areas reporting the highest sales experienced in more than a decade.

Turning the Corner

The Wasatch Front region's population and industrial base makes it the primary market for residential sales in Utah, but smaller cities, like Brigham City and Logan, are also posting impressive gains, and Park City and St. George have emerged as housing "hot spots."

"Utah appears to have turned the corner economically," says Doug Richards, president of the Salt Lake Board of Realtors. "The demand for housing is up, and interest rates are down. It's as good a market as we've seen in 10 years."

After years of rampant new construction in the mid-1980s and a resulting backlash of oversupply and depressed prices in the latter part of the decade, Utah's market has stabilized with a positive outlook for the future, according to Richards.

"The increase in residential sales is a reflection of Utah's healthy economy," he said. "More companies and individuals are realizing that we have wonderful resources here, and the positive national attention we've received from things like the Olympics bid and the Fortune magazine story has made a real difference. It's only a matter of time before people outside Utah realize this is a wonderful place to live."

The boom in Utah's residential real estate comes when housing is depressed in other parts of the country, the opposite of what occurred in the late 1980s when the state's stagnant market paled in comparison with other regions such as California and the East Coast.

And while the tables have now turned, Utah still benefits from efforts to spur housing sales in these markets, most notably a drop in interest rates over the past 18 to 24 months. The current availability of mortgage loans at rates between 9 and 10 percent has propelled increased activity in an already bullish market.

That doesn't indicate, however, that Utah is insulated from the tighter lending conditions in effect throughout the U.S. The positive aspects of lower interest rates are balanced by more exacting FHA regulations and a requirement for increasingly large downpayments at the time of sale. Also, a new FHA mandate effective July 1 raised the amount of mortgage insurance that must be paid up front, a move expected to eliminate many first-time buyers.

Despite increasingly stringent lending policies, the demand for new housing along the Wasatch Front has outpaced supply, according to Joan Pate, a sales associate with Coldwell Banker Premier and the firm's No. 1 producer from 1987 through 1990.

New Consumer Demands

While downturns in the local residential market in the late 1980s drove many builders either out of business or out of state, those who survived are thriving under current conditions, Pate said. "One reason the market in new homes is so hot is that builders are catering to changes in what people want in a home," she explained.

Pate indicated the most popular features in new homes selling today reflect family lifestyle changes. The "great room," or large open main floor area which includes both kitchen and family-room space, is highly sought after, as are expansive master bedrooms flanked by large bathrooms equipped with jacuzzis, spas, and room for exercise equipment. The "killer" kitchen outfitted with the latest amenities is also a high priority for many new home buyers, she added.

The majority of growth in the residential market can be attributed to sales of new or recently-built homes, and there is an increasing demand for houses in the $250,000 price range--markedly higher than the median $86,507 price tag typical of the Salt Lake area, Pate said.

"With our improving economy, more companies are coming in from out of state, and many executives who transfer here have sold their homes in higher-priced markets. They have more money to spend on a home, and they're asking for features that fall into the quarter-million dollar range," she noted.

Relocation Sales

Residential realtors often work closely with companies considering locating or moving operations to Utah, as the availability of affordable housing for employees is an important criteria for judging a state's viability. Many firms utilize national real estate networks or franchises such as Coldwell Banker, Century 21, or Better Homes and Gardens, which have affiliate offices throughout the country to assist in both relocation efforts and the sale of a transferred employee's home in another market.

In many instances, realtors will function as Utah ambassadors when a company is evaluating the plausibility of coming here, Pate said. "We work with their personnel resources staff, escorting them around the area and showing homes, shopping centers, and schools. We will also make formal presentations, giving information on everything from taxes to recreational opportunities."

Coldwell Banker, a premier member of the Sears Financial Network, has participated in the relocation of many employees of other Sears-owned companies, including Discover Card Services, Sears Payment Systems, and Mountainwest Financial, all of which recently established Utah operations. Pate, who has personally worked with some 50 Discover Card employees transferred to Salt Lake, said many of their concerns over moving here are centered around misperceptions about Utah.

"Drive time to work is always a primary concern, but people also want to know about the influence of the dominant religion and about snow--is it terrible, do they need a four-wheel drive vehicle to get around? They also think prices are going to be lower than they are, even if they're coming from a state where housing is much more expensive. There's a perception that we're a rural, rather than a metropolitan area," Pate said.

Salt Lake Hot Spots

Even though new homes account for a substantial portion of growth in the Salt Lake market, sales of existing homes in certain areas of the valley are flourishing. Bob Plumb, a partner in Plumb & Co., specializes in the area between 800 and 3300 S. and 1300 E. eastward and says demand is high for quality homes in this "niche" market.

At a median price of $95,000, most homes in this area are dated and require remodeling but are sought after because of their location. "This area has always been desirable to professional people who want to be close to town," Plumb observed. "They're willing to bypass some of the features they could buy in a new home in order to be here, though we are seeing people looking for more space and more conveniences than before."

Plumb indicated the Avenues, Sugar House, and Holladay areas are plagued with a lack of inventory of quality homes for sale, and correspondingly, prices are on the increase. In many cases, houses are sold within days of being placed on the market and multiple offers, unusual even two or three years ago, are becoming commonplace.

The willingness of buyers to purchase a home for the quality of life it would afford rather than its investment potential is an emerging trend, Plumb said. "A lot of the hype we heard in the late 1970s and early '80s about making a killing in the real estate market is gone. We're seeing more people buying houses simply because they like them--not just because of the potential appreciation value of their investment."

Utah County Sales Rise Sharply

According to Gary Tate, president of the Utah County Board of Realtors, the Utah County region has posted the strongest growth rate in terms of improvement of any other in the state. The market is strong in sales ranging from starter homes to the $160,000 price range, and new home construction is at its highest level since the mid 1970s, he said.

Tate indicated sales are brisk in both new and existing homes, though there is a significant shortage of new homes available for first-time buyers. The influx of new industry to Utah County, primarily in the high-tech arena, has brought more mid- to upper-income workers to the area, and builders can realize more profit by catering to those buyers, he said.

The average price of a home in Utah County has risen 15 to 20 percent over the past 18 months, and those for sale frequently have multiple offers, Tate said. "People have more confidence in the economy, and that shows up in the residential market. As industry here grows, so does the population and the need for housing," he noted.

Another Boom for Park City

New industry has also been the driving force behind the resurgence in Park City's residential market. "The creation of Salt Lake City as a hub for Delta Air Lines has been the single largest factor influencing the rise in this market," says Richard Dudley, president of the Park City Board of Realtors.

From 1988 through 1990, Park City has seen a 49 percent increase in residential home sales and a whopping 52 percent increase in sales volume. The median home price, however, has risen only slightly from $167,000 to $170,000.

The substantial number of Delta employees who chose to make Park City their home has had a dramatic impact on those figures. "They were the first group of professional people to discover that the commute is a piece of cake," Dudley said. "And in Delta's case, it's an ideal situation because many of the people who have moved here only have to commute once a week."

Park City's recreational opportunities, peaceful mountain atmosphere, and quality of life have also lured newcomers who are mobile in their professions. With the advent of the personal computer, modem, and fax machine, many professionals are no longer tied to an office environment. An increasing number are choosing Park City's less hectic lifestyle, Dudley observed.

The residential boom has produced a shortage of homes in the popular $200,000 to $270,000 price range, Dudley said, and buyers are finding they must go outside Park City proper to the Snyderville Basin area to meet their requirements. The average price of a home in the Park Meadows subdivision, for example, shot up 60 percent between 1988 and 1990, from $194,500 to $325,000.

Both newcomers and longtime Park City residents are concerned that burgeoning growth will adversely affect the quality of life in the area. "The trend is toward closing the door on new development," Dudley said. "People want to control construction and get a grip on growth before it's too late, and there is also a large desire for open space."

Off the Wasatch Front

St. George, with its longstanding reputation as a haven for retirees, is now seeing its residential market buoyed even further by an increasing number of families moving to the area. "Light industry is booming here," according to realtor Claudia Ashby, who said the sunny climate and emphasis on family that attracts the retirement community has also proved a magnet for business.

Ashby, president of the statewide Utah Association of Realtors, attributes the growth in residential sales throughout the state to the success of economic development efforts. "I have to applaud the governor and various economic development agencies," she said. "We aren't just seeing growth in major metropolitan areas--even cities like Vernal, which have been distressed, are seeing their housing markets pick up."

Industry Issues

The Utah Association of Realtors, both locally and as a chapter of its national counterpart, serves as an information resource, watchdog organization, and lobbying group concerned with issues affecting the residential real estate industry. The federal government's role in environmental issues is currently high on realtor's lists of legislative concerns, Ashby said.

"Inspections for radon gas or lead paint can inhibit the market because they are so costly to the buyer," she noted. "And the government's involvement with wetlands or endangered species can tie up land so that it can never be developed." Other ongoing concerns include banks increasing their involvement in the real estate market (which the group asserts is an unfair advantage) and moves to establish a sales tax on homes or to eliminate tax deductions for mortgage interest.

Utah's legislature recently passed a bill designed to protect the interests of buyers and realtors as well, Ashby said. Real estate agents are now required to complete 12 hours of course work in each two-year licensing period to stay abreast of new information and changes in the industry. Agents must take a core course covering important issues such as law changes and risk reduction, and they can fill the remainder of the requirements by taking other courses approved by the Utah Division of Real Estate.

Individuals who have recently moved to Utah are generally enthusiastic about the availability and price of quality homes here. A national study by the accounting firm Ernst & Young earlier this year designated Salt Lake as having the most affordable housing of all major markets in the U.S., a factor most companies take into consideration when evaluating potential expansion sites.

Discover Card Services, which established its Salt Lake operations center in September 1990, transfered 15 senior managers to Utah as part of the move, according to general manager Larry Burke. The residential market, as well as other local costs of living, was a factor in the company's decision-making process along with the availability of a quality workforce, legislative climate, quality of life, and availability of adequate facilities.

"Our senior management didn't want to go to a city where they would have a hard time buying or where homes were too expensive. Now that we're here, I haven't heard of one unhappy person. The response has been very positive, and everyone seems pleased with Salt Lake and Utah as a whole," Burke said.

Teresa Browning-Hess lives in Salt Lake City and writes about business topics.
COPYRIGHT 1991 Olympus Publishing Co.
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Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Author:Browning-Hess, Teresa
Publication:Utah Business
Date:Aug 1, 1991
Previous Article:Commercial market expansion: growth hampered by lack of money.
Next Article:Park City: the best real-estate buys.

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