Although the national real estate market remains on a somewhat fragile path, there is a great deal of optimism around the country that the market has turned the corner and is moving in a positive direction. This optimism is being expressed across the board from consumers to real estate professionals to large and small home builders. This is best displayed by the confidence level of home builders, which according to the National Association of Home Builders has reached its highest level since 2007 based on their Sentiment Index, and this confidence seems to be moving into all aspects of the real estate market.
The housing inventory nationwide fell to 2.3 million homes in January; which is an approximate six month supply. This is the lowest level of inventory since March of 2005 according to the National Association of Realtors. The NAR also reports that existing home sales in the month of February, although down slightly from January, are up over nine percent from February of last year. They are also predicting that in 2012 existing home sales will increase by 7-10 percent, the highest level in five years, with a pattern that will move up and down slightly from month to month.
There are still a few areas in the market that are causing some concern. A large number of contracts are experiencing failure, over 30 percent, due to buyers’ mortgages being rejected and appraisals coming in below negotiated prices. Also, foreclosures and distressed properties continue to have a negative effect on the market. In February distressed properties accounted for 34 percent of all home sales nationally, 20 percent being foreclosures and 14 percent short sales. Additionally, the recent agreement reached between the government and several major mortgage servicers will bring a large number of distressed properties into the market over the next quarter. These properties will continue to put pressure on home pricing.
UTAH AS A WHOLE:
In Utah the foreclosure rate fell substantially during the first quarter of 2012, nearly 50 percent from the same period last year. This marks the fifth straight quarter of year-over-year decreases in foreclosures. Despite the large drop Utah still has the ninth highest rate of foreclosures in the country with one in 198 households filing for default, still well above the national average of one in 230 households.
The inventory of homes in Utah fell nearly 25 percent year-over-year in February to 19,891 homes. There has not been this small an inventory across the state since March of 2007. The total months supply of homes in Utah has also fallen significantly over the past year, dropping 32.5 percent from a 10.4 month supply in February 2011 to a 7.0 month supply in 2012, the lowest total months supply of homes since July of 2007.
The Utah economy continues to outpace the majority of the country providing a more stable environment for the housing industry. Unemployment remains relatively low compared to the national average and employment growth continues to improve, particularly in Salt Lake and Utah counties. The improving health of the Utah economy has caused the National Association of Home Builders to add Salt Lake and Provo to it’s Improving Market Index, which tracks areas that have had increases in employment, housing permits and housing prices for at least six months since reaching their low point.
Park City is also benefiting from an improving economic environment. Fitch Rating, one of the top global rating agencies, recently awarded Park City a AA+ rating, the second highest that can be awarded. This rating demonstrates Park City’s ability to manage itself responsibly, even through tough economic times. Fitch stated that Park City has strong financial flexibility due to diverse revenue, a balanced budget, high reserves and a history of paying for capital projects as they arise. Other resort towns such as Jackson Hole, Aspen, Stowe and Vail have no Fitch rating.
The Park City real estate market statistics for the first quarter of 2012 show a stable market with very little movement from month to month during the first quarter. What the numbers have shown over the past year is a market that is fluctuating but stable. The median single family home price, which has been level at $515,000 since the first of the year, rose slightly to $516,500 at the end of the first quarter. This compares to a median home price of $515,000 at the same time last year.
Active listings have remained constant over the past three months after increasing slightly from the end of 2011. Compared to March of 2011, active listings have seen a noticeable decrease. Pended listings however, have experienced a constant increase during the first three months of the year and a marked improvement from the same period of 2011. Looking at active listings and pended listings side by side shows that as active listing are shrinking pended listing are growing, meaning the percentage of listing that are selling is increasing at an accelerated pace.
The 12 month rolling number of units sold remains on a trajectory of improvement. The total number of units sold over the past twelve month period ending in March is up 11 percent from the same period last year, with a total of 1,634 units sold. At the end of the first quarter, 42 percent of listed properties had sold during the previous 12 month period. This is a healthy increase over the 36 percent from March of last year. It is worth noting that although there is an increase in year-over-year units sold the percentage of increase has been declining over the past four months.
While the rolling 12 month total dollar volume sold has leveled off since the end of 2011 the percentage of increase from year-over-year has been rising. The 11 percent increase at the end of March 2012 was the largest percentage increase since December of 2012.
The absorption rate of properties (all category types) in the Park City area is now at a level not seen since the first quarter of 2008. At the end of March there was a 17.24 month supply of property. At the same time last year there was a 20.36 month supply. The improvement in the absorption rate is due in part to the decrease in the number of listing over the past year and in part to an increase in Buyer demand than that of a year ago. The average number of days on the market for a property is now at 159 days.
There was a slight dip in most of the indicators in the month of February. The fact that numbers jumped back in March would suggest that February was a bit of an anomaly, likely impacted by the lack of normal snowfall, and that the market remains in a recovery state. We can expect that there will be a few more months like this but overall the market is trending in a positive direction although at a bit of an uneven pace.
One final indicator worth looking at is the Affordability Index. According to Wells Fargo the affordability of homes nationally is at its highest level in 20 years. In Utah the story is very similar with a record Affordability Index. The index takes into account median family income, employment conditions, home pricing and mortgage rates among other things. With the real estate market conditions as they are it is still a great time for buyers to find good deals and take advantage of the current opportunities.