WINDERMERE NEWS NO HOUSING BUBBLE IN SIGHT - For Now Posted in Market News by Matthew Gardner Exactly 10-years ago this month, Alan Greenspan was asked if he had any concerns regarding the housing market. At that time, he emphasized that he saw no sign of a nationwide housing bubble, but he did have concerns over “froth” in the market and pointed to a big increase in the purchase of investment properties -- particularly in second homes. As a result, he said, there are “a lot of local bubbles” around the country, but not at a national level. As we are all very much aware, he, along with many other esteemed economists, was incorrect in his prediction that there was no national housing bubble in sight. So here we are, a decade later, and some are starting to suggest that we are on the verge of another “bubble” bursting due to an overheated housing market. I’m often asked if there is any truth to this, and my response is no, I don’t believe there is a national bubble on the horizon. And here are the reasons why: 1. The flippers have left the building – in as much as it causes me untold angst to see the resurgence of reality TV programs espousing the wonders of house flipping, the country has seen a marked slowdown in this type of business. Why? Well one reason is that the number of foreclosed homes continues to drop. Foreclosures are the preferred property type for flippers, as margins can be significantly higher. Given that there is less distressed inventory, it’s not surprising that homes purchased with the intent to “flip” have declined nationwide. Data supplied by RealtyTrac suggests that the percentage of homes that were bought with the intent to “flip” has dropped from a peak of 6.7 percent at the beginning of 2014 to 4 percent today, and I believe that this share will continue to decline, signifying a more normalized market. 2. Lending standards remain very stringent – Banks actually did learn a lesson from the collapse of the housing market and remain wary, and because of this, qualifying for a mortgage remains difficult. For example, in April of this year, the average FICO score required for an approved conventional home loan was 756 with a 19 percent down payment. The average FICO score for someone who was denied a loan (with an average down payment of 17 percent) was very high at 699. Even low down payment programs (i.e. FHA loans) that have less stringent FICO requirements (686 for FHA loans approved in April) are still high enough as to not cause me concern when I think about these borrrower’s ability to handle their mortgage obligations. To further support this view, there are several components of the Dodd–Frank Wall Street Reform and Consumer Protection Act that provide substantial safeguards when it comes to irresponsible lending practices, such as requiring lenders– through the qualified mortgage rule – to ensure a borrower’s ability to repay. 3. Home prices are up, but not to pre-bubble levels – here I looked at data provided by S&P Case Shiller index which is a useful resource because it calculates the increase/decrease in value of the same house over time, rather than just the make-up of sales during a specific time period. At the national level, the bursting of the housing bubble led to a 27 percent drop in the index. The index has risen back up but is still 9 percent below the prior peak. 4. Interest rates are going to (eventually) start to rise – and this will take some of the heat out of the market. Now, there are some who will say that any increase in mortgage rates will negatively impact the housing market, but I don’t agree. Although it is true that an increase in rates does decrease buying power, the naysayers are ignoring the fact that we are in a growing economy. The growth in employment, and the subsequent drop in the unemployment rate, will lead to wage growth, and increasing incomes will take some of the sting out of any rate increase. Given all of these points, I do not see the risk of a national “housing bubble” anywhere in the foreseeable future; however, I do think we are seeing localized “froth” in some markets.
UPDATE SALT LAKE COUNTY REAL ESTATE JULY 2015 STATISTICS 7.1.15–7.31.15
New Listings . . . . . . . . . . 2,048 Median Listing Price . . . . $265,000 Median Sold Price . . . . . $260,000 Median Days On Market . . . . . . 16
Provided by the Wasatch Front Regional Multiple Listing Service
Summer is time for
OUTDOOR ADVENTURES
WITH A BACKDROP LIKE THE WASATCH FRONT, and the Wasatch Back right in our backyards, it’s hard to live in Northern Utah and not be an outdoor adventurer. Our Windermere Utah Offices are comprised of a great group of adventuring agents who truly know the meaning of working hard and playing harder. Windermere recently started a hiking group that has so far conquered Mt. Olympus and Mt. Aire. With more hikes scheduled throughout the summer, our agents are excited for the opportunity to get outside and enjoy all that Utah has to offer when they are not hard at work putting and keeping deals together. If you’re looking for some fun hiking spots this summer here are a couple of our favorites MOUNT OLYMPUS SUMMIT Length: 7.5 miles round trip Difficulty: Strenuous Description: Mount Olympus is a prominent 9,026 foot peak on the east side of the Salt Lake Valley. Views from the summit are considered to be some of the best in the region. The top of the mountain is a federally protected wilderness area with great aesthetic and recreational value. The trail is wide and easy to follow. It gains some 4,100 feet over the course of 3.75 miles, making it a fairly steep climb. But this is a great hike and virtually anyone can do it if they just take it slow and steady. This is a spectacular mountain and it is well worth the effort. There are few places in this world where you will find such a gratifying summit, in such a pristine area, so close to a metropolitan area. MARY, MARTHA & CATHERINE LAKES Length: 4 miles round trip Difficulty: Moderate Description: There are 3 beautiful alpine lakes in close proximity, a short distance above Brighton Ski Resort, at the top of Big Cottonwood Canyon. A well-marked trail leads to them, running through wildflower-filled meadows and lush forest, under craggy mountain peaks. The entire area is very scenic. The trail gains some 1173 feet over the course of the hike. Most people think Lake Catherine is the most beautiful of the three lakes. It is the highest and we strongly encourage people to hike far enough to see it. The route is round trip so you can turn back at any point if you desire. Trailhead: The trailhead is at the back of the parking lot at Brighton Ski Resort. A kiosk provides trail information. From there you will follow the obvious trail SW into the forest. Lake Mary: Lake Mary is actually a reservoir used to store water for Salt Lake-area culinary systems. Its size will depend on the amount of water stored, and current demand. When low, the lake is ringed by a large exposed shoreline. The lake is scenic, even at low levels. Lake Martha: Just a short ways above Mary, you’ll pass Lake Martha in its alpine basin against a craggy ridge. Martha is the smallest of the lakes. Lake Catherine: Continue on to Lake Catherine and you will be rewarded with views of its azure waters against the surrounding mountain peaks. This view is well worth the effort.
Trailhead: The trailhead is located on the east side of Wasatch Boulevard. From 4500 south, drive south on Wasatch Boulevard for about 1.6 miles to the parking area. A sign identifies the parking lot as the Mount Olympus Trailhead. (A large rock next to the trailhead is known locally as Pete’s Rock and is a popular place for casual rock climbing.) Summit: From the trailhead, follow the obvious trail east up the mountain. This is a very popular hike during summer and fall and a surprising number of people do it during the winter.
The MAIN REASON
You should NOT
WAIT TO BUY
The SALT LAKE BOARD OF REALTORS® provides monthly statistics. Notify me today if you would like me to include a version of these updates in your inbox. UtahRealEstate.com Home Sales Graph Report
Search Criteria: State is Utah, County is Salt Lake Click and drag area inside of graph to zoom.
Home Sales Per Quarter Total Number Of Homes 0
However, there was also information buried within the report that revealed that now is definitely the time to buy your first home or move-up to the home of your family’s dreams. With home prices still below peak values and mortgage rates still near historic lows, the monthly mortgage payment on a median priced home is less than at almost any time in the last 25 years. Here is a graph which helps visualize the data from the report:
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Median Sold Price (in $1,000 Increments) Median Sold Price (in $)
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UtahRealEstate.com
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Home Sales Graph Report
Prepared By: Trish Martinez Search Criteria: State is Utah, County Salt Lake Windermere Real Estate-Utah (Salt Lake is Branch) 801-891-6432 Click and drag area inside of graph to zoom. This report was generated automatically by the Wasatch Front Regional MLS on 07/14/2015 at 11:56 AM
Home Sales Per Quarter $300k
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The Joint Center for Housing Studies at Harvard University recently released their 2015 State of the Nation’s Housing report. The report concentrated on the challenges renters in this country are facing because of the diminishing supply of quality rental units and dramatically escalating rents.
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Quarter Median Sold Price (in $) UtahRealEstate.com
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Home Sales Graph Report
Prepared By: Trish Martinez Search Criteria: State is Utah, County is Salt Lake Windermere Real Estate-Utah (Salt Lake Branch) 801-891-6432 Click and drag area inside of graph to zoom. This report was generated automatically by the Wasatch Front Regional MLS on 07/14/2015 at 11:55 AM
Home Sales Per Quarter $255k
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With home prices increasing and mortgage rates projected to increase, now is the time to buy.
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BOTTOM LINE
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Prepared By: Trish Martinez Windermere Real Estate-Utah (Salt Lake Branch) 801-891-6432 This report was generated automatically by the Wasatch Front Regional MLS on 07/14/2015 at 11:53 AM
Marvin Jensen Associate Broker ABR, CRS, GRI, SRES cell: 801-403-4030 mj@marvinjensen.com www.SaltLakeLifestyle.com
Windermere Real Estate - Utah 1240 East 2100 South Suite 600 Salt Lake City, UT 84106
Please Consider Recycling Our Newsletter. ** Monthly mortgage payments are principal and interest only, based on a $200K fully amortizing mortgage. * Projected Source: Freddie Mac
MOVING TIPS it’s time to learn It’s summertime, aka moving season! Moving to a new city is exciting and it can be easy to get caught up in a whirlwind and forget to take care of a few important details. Before you pack your bags and head off to your new home, here are a few things to mark off your to-do list...
KNOW HOW YOU’LL GET AROUND YOUR NEW CITY Make sure to research public transit and traffic patterns of the city you’re moving to before you get there. Know how much it’ll cost to get around, how long your daily commute will take and the safest routes on the road, trains, or subways.
STRAIGHTEN OUT YOUR FINANCES It’s important to have your money in order before making a big move. A young professional moving to a new city needs to have a budget. This can include a reasonable monthly rent for a new city, a deposit for your new place, grocery limits and some money set aside to use for entertainment or other things you want to do while exploring the city. If need be, sit down with an accountant and get your finances in shape.
MAKE SURE YOU’RE CONNECTED One of the must-haves for anyone moving to a new place is an Internet connection. Be sure to plan ahead for setting up Internet in your home. Look into availability, pricing, speed and which provider offers the best service for your needs. You’ll want to be up and running soon after you get into your new home so you can research all of the exciting opportunities in your area.
PACK A BEGINNER BOX You’ve arrived at your new home, you’re exhausted, hungry and just want to relax only to realize you have nothing to eat, sleep on, or wear until you unpack. Allow yourself some extra unraveling time by packing yourself a box with first-day essentials. The box should include a change of clothes, utensils and a plate to eat on (in case you want to microwave a quick meal), toothpaste and toothbrush, a bath towel and a blanket. Sit down and think about what you might need to get you through the first day and pack it all in a clearly-labeled box that’ll be easy to find.