Real estate inventory down, demand up
July 26, 2011
Halfway through 2011, signs of growth in the Park City real estate market are clear. The single-family home market is strong; prices for condos and lots, however, are still falling.
That’s according to the Park City Board of Realtors’ 2nd Quarter Report Summary released last week.
The three clearest signs of improvement are changes in single-family home prices and foreclosure rates and a steady decline in inventory.
Single-family homes strong
Single-family home sales are up 24 percent over last year. They accounted for 44 percent of all sales and 55 percent of total dollar volume. The median price for Summit and Wasatch counties is also up one percent, with greater increases in some neighborhoods. On average, houses are also selling at about five percent off the final list price, which is close to the historical norm, the report said.
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Distressed properties are still driving the average sale price of condominiums and vacant lots down below 2010 levels, but foreclosure sales are now only 27 percent of the total (down from 35 percent one year ago) and the properties only represent seven percent of all those on the market, the report said.
There are now about 2,700 units on the market. That inventory level is below the 3,060 in 2010. Brisk sales, if continued, are predicted to improve that further.
However, when comparing the second quarter of 2011 with that of 2010, it is clear the market is still soft.
Prices still down
Low prices caused by the distressed properties on the market are still resulting in a high number of transactions. The period examined in the report saw the greatest number of sales since the fourth quarter of 2007.
That’s good for buyers, Realtors and people needing to sell. The number of sales overall is up 24 percent over last year. Condominium sales are up eight percent and lot sales are up 55 percent.
Condo sales prices are down from a year ago. They have fallen 32 percent in the Canyons area and 23 percent at Kimball Junction. Condo prices are actually up in certain neighborhoods, but the average sales price is down for the entire area.
Vacant lots selling
Vacant-lot sales were the slowest, weakest part of the market during much of the recession. With prices down, buyers are perceiving bargains, the report said. Promontory alone accounted for 42 percent of all lots sold, the remainder being scattered throughout the area. Promontory prices now are actually on the rise, suggesting prices have "bottomed out" there, the report said.
Reason for optimism
Perhaps the most optimistic data in the report came from comparing the second quarter of 2011 to the first. While not much has changed since 2010, there is significant improvement since the beginning of the year, especially in the average sale price of single-family homes.
Mark Seltenrich, one of the report’s authors, said single-family homes have always been the strongest segment in the market. In part, that’s because Park City continues to attract people who want to make it their primary residence.
The profile of primary residence shoppers is very similar to vacation home shoppers, said broker Jess Reid.
And affordability is "off-the-charts good," said Prudential head Steve Roney.
Low prices have spurred activity and, as inventory goes down, the area is beginning to experience the results of decreased supply and increased demand, Roney added.
Foreclosures still a factor
Wells Fargo mortgage broker Rick Klein said fewer single-family homes are in distressed sales – 23.5 percent of homes for sale versus over 29 percent of condos for sale. Klein added that there’s an old adage that condos "are the first to fall and the last to rise," although he isn’t sure why that is.
Seltenrich said Canyons and Kimball Junction condos have likely been so hard hit because they were the last be built before the recession and were bought at the peak of the market. Those condos finished since the start of the economic downturn appear to be faring better, he said.
Klein said over half of the condo sales in lower Deer Valley, Canyons area and Kimball Junction were distressed.
He also predicted it will be another six to nine months before distressed sales stop impacting market prices.
Seltenrich, Reid, Roney and Klein all agree bank financing for qualified buyers is getting easier, but about half of all transactions are still paid with cash.
That was common before the recession as well, Roney said.
The best news to come out of all of this, Roney added, is that buyers have recognized the market’s bottom has been hit and they’re now off the fence. The results of this are beginning to be seen.
"The evidence with lot sales is really, really good; it means recovery. It means people are thinking about building," he said. "You only think of building when you can’t find what you want in the inventory, or if you’re a speculative home builder and think there’s not enough inventory."
Recovery slow, but steady
Seltenrich and Reid don’t disagree, but believe a full recovery is months away.
"Consumer confidence is still way below where we were several years back," Seltenrich said. "With real estate, I don’t see a quick increase in prices or sales volumes."
"It’s soft and going frustratingly slow," Reid said. "The Board’s report is certainly a legitimate positive spin but we’re in a soft recovery for a couple of years."
Reid said the recovery is "looking good, but not feeling so good." But that is how most Park City businesses are feeling, he added.
The quarterly reports used to include a breakdown of average sale prices for each neighborhood. With so many factors impacting each development, averages would not be helpful, the report said. People are encouraged to contact a local Realtor for an opinion on a particular property or neighborhood.