Mobility Magazine of Worldwide ERC, April 2016
By Don Mueller, CRP, RAC Member
Northern Utah, aka the Wasatch Front, is a metropolitan region in the north-central part of the state, consisting of a chain of cities and towns stretched along the Wasatch Range from approximately Nephi in the south to Brigham City in the north. Roughly 80 percent of Utah’s population resides in this region, as it contains the major cities of Salt Lake City, Provo-Orem, West Valley City, West Jordan, and Ogden.
The Wasatch Front is long and narrow. To the east, the Wasatch Mountains rise abruptly several thousand feet above the valley floor, climbing to their highest elevation of 11,928 feet (3,620 m) at Mount Nebo. The area’s western boundary is formed by Utah Lake in Utah County, the Oquirrh Mountains in Salt Lake County, and the Great Salt Lake in northwestern Salt Lake, Davis, Weber and southeastern Box Elder counties. The combined population of the five Wasatch Front counties totals approximately 2,125,000 according to the 2008 census estimate.
Although most residents of the area live between Ogden and Provo – a distance of 80 miles – which includes Salt Lake City proper, the fullest built-out extend of the Wasatch Front is 120 miles long and an average of five miles wide. Along its length, the Wasatch Front never exceeds a width of approximately 18 miles because of the natural barriers of lakes and mountains.
The region on the other side of the Wasatch Range, including cities such as Park City, Morgan, Heber City, and Midway, sometimes referred to as the Wasatch Back, has recently shared in the rapid growth of the region.
Utah’s first settlers of European decent were the Mormon pioneers, who migrated from the Midwest in 1847, led by Brigham Young, the prophet and president of the Church of Jesus Christ of Latter-Day-Saints. Upon entering the Salt Lake Valley, Young made this declaration: “This is the place.” (Some say he said, “This is the right place.”) The famous statement still holds true today in regard to real estate values and investment in the Wasatch Front.
The trends noted here are for Salt Lake County but also reflect the adjoining Wasatch Front area. A report in February by the Salt Lake Board of Realtors notes that real estate agents in Salt Lake County sold 13,323 existing single-family homes last year. This is a nine-year high surpassed only before the Great Recession with 15,317 homes sold in 2005 and 15,283 the following year. The combined value of single-family homes sold in 2015 rose 22 percent over the previous year, to $4.1 billion. The upward trend in housing prices persisted last year, logging an increase of almost 7 percent over 2014 for a single-family home, to a $272,000 median sales price, and 8 percent for a multifamily unit, to $189,000.
“There is still room for moderate house-price increases, provided mortgage rate increases are gradual,” says Cheryl Acker, president of the Salt Lake Board of Realtors. The board report characterizes real estate in Salt Lake County as “still relatively affordable” for qualified buyers, as a family earning the median household income and devoting 30 percent of its income to a mortgage payment could afford 56 percent of the homes sold in the county in 2015.
The Salt Lake Board of Realtors expects an 11 percent gain in total residential home sales of all types this year in Salt Lake County, to more than 19,000 units. An increase of 5 to 7 percent in the median single-family home price, to $290,000, is predicted as housing demand continues to exceed available inventory.
The number of homeowners with negative equity has now dropped to 2.5 percent of all mortgages. In previous years, homeowners were locked in to their current home and could not move up. Hence, in 2015 the move-up market was again supporting higher levels of sales, which put upward pressure on prices.
Another benefit of improving market conditions is the huge reduction in the sale of distressed homes (short sales and foreclosed properties). For five years, the “fire sale” prices of distressed homes dragged down overall housing prices. In 2011, one-third of all homes sold in Salt Lake County were distressed properties; it’s no coincidence that 2011 was the year of the largest decline in prices, 9.5 percent. The near elimination of short sales and REO sales by 2015 was also a contributing factor to the acceleration of price increases in 2015.
There is no sign of a bubble – both prices and sales are sustainable. There is very little inventory, and prices are increasing. The market is free of REO and short sales. From a market perspective, Utah and Salt Lake County seems to be “the right place” to buy and invest in a single family home.
Don N. Mueller, CRP, is a professional appraiser and real estate consultant based in Ogden, Utah, and a member of RAC (Relocation Appraisers and Consultants). He can be reached at +1 801 479 6123 or firstname.lastname@example.org.