Double dip in housing? Probably not
August 31, 2010
In mid-August, Realtors in Salt Lake County and around the nation announced July was a dismal month for home sales – some saying the worst in over a decade. Because August numbers were down as well, some experts warned of a "double dip" in the housing market.
Both local and state real estate experts said this week they doubt that will happen in Utah, but at least one believes another downturn would hurt Park City.
Mark Seltenrich, president of the Park City Board of Realtors, said Summit and Wasatch counties did not see a decline in home sales in July.
contrast, seven percent more single-family homes were sold in July 2010 than in July 2009.
Seltenrich said Park City’s market is stronger because buyers here weren’t relying on the federal tax credit for purchasing homes by April 30. Once that expired, people in other areas quit buying. That trend had more impact on the East Side of Summit County and in Wasatch County, but only two fewer homes sold in those areas in July than the previous year.
Local real estate agents are concerned about a second downturn, he said, because it would affect second-home buyers. Most buyers right now have a mix of motivations and many are taking advantage of low prices and interest rates, he said.
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Unfortunately, even though the number of sales has increased slightly over summer 2009, that’s still not many homes – 58 sold in July 2010.
Eric Allen, director of MetroStudy for the Utah and Idaho regions, said that leaves Summit County 28 months worth of housing inventory. That means it will take over two years for every home currently for sale to be sold at the current rate. MetroStudy tracks the market for the residential construction industry, and they say two or three month’s worth of inventory is "healthy."
"There were 104 annual ‘starts’ last quarter but only 68 closings," he said.
That’s new homes. And many new houses are built under contract, doing little to remove older ones from the market, he said. Of all the homes sold last quarter, only three were finished and vacant without a contract buyer. In all of last year, only 10 such properties sold.
Investors, who used to snatch up new homes, are focusing on foreclosures and short sales, he said. Primary home buyers are struggling because they can’t sell their old home in order to move to a place like Park City, he added.
James Wood with the Bureau of Economic and Business Research at the University of Utah said these trends don’t worry him because employment numbers have been gaining slightly for the past three months. Retail sales would need to tank in the coming months for a "double dip" recession to occur, and he doesn’t see that happening.
"The expectation is in 2011 all the important indicators will turn positive with the exception of non-residential construction," he said.
But it is startling, he conceded, that for 12 consecutive months home sales were increasing and then stopped so abruptly. There are worrisome signs, he said. The job numbers were projected two months ago, and the international credit market is still damaged.
"It’s going to take a while for a recovery to take hold," he said.
Wood also disagreed with optimists who say Summit County is immune to these negative trends. Although it is a unique housing market from the rest of the state, it was hurt by the recession as well.
Almost 270 residential building permits were requested during the first six months of 2006. Only 37 have been requested so far this year, he said.
"You can hardly say you’re immune," he said. "I think you’re in the soup with the rest of us."
But for right now, the trends appear to be positive.
The Utah housing market is still up 18 percent from last year and the Wasatch Back is up over 40 percent, Seltenrich said.
The comparable success of Utah’s market is largely due to low selling prices, the experts agree.