The housing market in northern Utah looks healthy. We have half as many homes on the market as we did at the peak of the crisis in August 2008, when we had over 8600 homes on the market. All indicators point towards a continued mild recovery.

As of January 1, 2012, we have 4,750 homes and condos for sale in Salt Lake County. 1,470 are listed as short sales and 153 are REO bank owned properties. We have consistently had 1/3 of the properties in our market listed as distressed, or lender mitigated. 11,177 homes and condos sold last year and there are another 1,324 sales pending. The absorption rate is down to six months! A far cry from the 18 months we once had. Interest rates re still hovering at or below 4%. Economists don't see this changing in the foreseeable future.

Happy New Year!

Home prices in Salt Lake and across the nation are still falling, but the good news is that Salt Lake's median home price is now about three times the state's median household income of $59,000.

Historically, lenders used the three-times income rule as a rough guide in determining how much a home buyer could afford, according to Kay Ashton of SWBC Mortgage Corp.

Salt Lake's median home price (all housing types) in the first quarter was roughly $187,000. Based on the three-times income rule, if a household earned the state's median income of $59,000 they could qualify for a home around $180,000. With today's low mortgage rates, that amount would likely be higher.

Of course, the three-times income guideline is only a general rule of thumb. It doesn't take into account other debt or down payments. But it does show that home prices are finally within reach of more households.

A report by Zillow.com today said home values across the U.S. fell 8 percent in the first quarter compared to a year ago and are down 3 percent compared to the fourth quarter.

Zillow's Home Value Index does not include Salt Lake City. However, according to Utahrealestate.com, Salt Lake's home prices are following a similar trend. Home prices (all housing types) in Salt Lake fell 9 percent in the first quarter compared to last year and were down 7 percent compared to the fourth quarter.

Salt Lake's median home price (all housing types) was at $186,900 in the first quarter, slightly higher than Zillow's national median price of $169,600.

All of this negative news on housing prices have some analysts going against the grain. According to Brett Arends of MarketWatch, there are too many bearish reports that make it hard not to be a "contrarian bull."

"I have absolutely no idea when real estate is going to hit rock bottom," Arends said. "It may take several years. I suspect it will do so in different markets at different times. But there are good homes out there going really cheap. If you hunt down the bargains, you're disciplined about price, you get the right financing, and you hold on for five years or more, you'll probably do pretty well from here."

Tthe Greater Salt Lake County Absorbtion Rate as of March 1, 2011, including February 2011 home sales figures are as follows:

Active Listings 6,476
Homes sold in the past year  10,255
Homes currently pending (under contract)   1,340
Listings that expired in the past year 12358

New listings in the last 30 days   1,516
Homes sold in the last 30 days    579
Home pending (under contract) in the last 30 days  812
Listings that expired in the last 30 days   947

Salt Lake area Absorption Rate (months supply of homes) 11.2

The following is a snapshot of pre-foreclosure short sales:

Active short sale listings    1,745
Homes sold in the past year that were short sales    1,388
Short sale homes currently pending (under contract)  232
Short sale listings that expired in the past year   2,503

New short sale listings in the last 30 days  317
Short Sale homes sold in the last 30 days  102
SS sales pending (under contract) in the last 30 days  128
Short Sale istings that expired in the last 30 days 218

Salt Lake area Absorption Rate of short sales (months supply of homes) 17.1

Conclusions

26.9% of all Active Listings are Short Sales
13.5% of all Sales Last Year were Short Sales
20.3% of Short Sale Listings ended up Expired Last Year

20.9% of New Listings in Last 30 days are Short Sales
17.6% of all Listings Sold in the Last 30 Days were Short Sales
15.8% of all Pending Transactions (Under Contract) in Last 30 Days are Short Sales
23.0% of all Listings that Expired in the Last 30 days were Short Sales

The previous information was derived from the Wasatch Front Multiple Listing Service MLS

In January 2011, we only saw 468 home sales in Salt Lake County, but 679 transactions went under contract and are pending.  Of the 468 homes sold, 75 were short sales.  We currently have 6420 residential properties for sale and a 12 month absorbtion rate.

Michael Hoffee is no longer with Rocky Mountain Realty.  He has started a new real estate brokerage in Sandy Utah specializing in residential real estate.  The new firm is Wasatch Mountain Realty.  They assist both home buyers and sellers with relocations, short sales, foreclosures, luxury properties, second homes, ski properties, and commercial property, and investment acquisitions.  Wasatch Mountain Realty is headquartered in Sandy, and services all of Salt Lake County, including Sandy, Draper, Cottonwood Heights, Holladay, South Jordan, Riverton, Herriman, Murray, Midvale, Sugarhouse, the Avenues, and of course Salt Lake City.  WMR covers Park City and Deer Valley in Summit County. In Utah County, the cities of Alpine, Highland, Cedar Hills, Saratoga Springs, and Lehi are well represented.  The new website is http://www.WMRutah.com and Michael's new email address is Michael@WMRutah.com .  The office phone is 801-571-5001 and the office fax is 801-571-6001.

T'is the Season to be Jolly (think positive) ~ turn up the heat, and turn up the price

Contrary to what some Utah home sellers think, I believe there is no better time of year than right now (November through January) to put your house on the market if you are considering selling it in the near future. The gardens have been cleaned up for the winter, the lawns have had their final manicure of the season, the garlands and outdoor decor has been put into position, and soon the interior will smell of baking goodies and wassail.

Why is this a good time of year to sell?  There is often a lack of inventory of homes for sale on the market during the timeframe immediately following Thanksgiving, and this can put homeowners thinking of selling, in an envied position.

Lack of homes on the market often means, aside from maybe getting a higher sale price from real buyers (yes they are always out there) - the ones that must buy to fulfill obligations they have personally undertaken, such as having sold their own place already, not thinking about what might be available for them to choose from elsewhere, in a different market area (even across town) - and they are ready, willing, and able to buy your house.  There are other people having special reasons for needing to buy at the moment, often looking for a quick closing, who are sometimes prepared to pay a premium, just to bring their house hunting to an end.

Let’s not forget the snowbirds looking for a second home in Park City , or a permanent home in Sandy, Draper and Cottonwood Heights for that matter, close to the greatest snow on earth!

And guess what? As a homeowner taking advantage of the season and all the community twinkling of lights, you might even get a boosted price for your property, rather than waiting until February to go to market, and possibly competing with your neighbors whose houses will come on the market then too, at variable prices. And those asking prices might be less than you could currently get for yours.

Your home will never show better than during this season of jewel tones that permeate the atmosphere making such a beautiful show. And it might just happen really fast for you. No muss, no fuss, and a quick sale at a great price.

It would be ideal to leave festive interior lights on for viewings, such as the Christmas tree and lighted garlands, and perhaps a fireplace turned on -BUT- only if you are just stepping out when the potential buyers arrive and staying outside, next door or across the street while the showing is taking place, so you can keep an eye on your house and return immediately following the showing.  Making your selling atmosphere optimal is never worth doing dangerous things, like leaving an unattended fire and tree lights plugged in.

For Fresh Air: bring half a cup of apple cider to a soft boil, then turn it off.  Toss in a cinnamon stick, a bay leaf, and a pinch of nutmeg.  Cover and let sit on a back burner, turned off.  Don't drink this, just keep it warmed before viewings.

This is a completely natural way to enhance the air.  By the way, even in winter, open a window for fifteen minutes each day, even on cold days, to change the air around in your house, so it doesn't smell stuffy to visitors, and if anyone has a cold it helps to chase away the germs.  There are magical pots available in shops throughout the season, but this is inexpensive and serves the purpose well. Can be reused indefinitely and does not impact the atmosphere negatively with chemicals.

This all could help bring the magical gift of a SOLD SIGN to your house for Christmas, and perhaps help you establish a new (high) norm in pricing for your neighborhood.

Is it time to take advantage of the market?

There is a BIG nasty surprise awaiting a number of people starting in 2013 that has NOT been mentioned by the media. Under the new Health Care Law, single taxpayers who earn over $200,000 of Adjusted Gross Income (AGI) or married taxpayers filing joint returns who earn over $250,000 get hit with a major surprise. They will have to pay a new 3.6% Medicare surcharge on all interest, dividends, royalties etc. This seems to be covered by the media. What has NOT been mentioned is that this Medicare tax also applies to capital gains. Thus, it applies to stock and bond sales, mutual fund gains and sales etc. In addition, it could even apply to the sale of your principal residence on all appreciation beyond the first $500,000 of gain.

Example: John and his wife earn $275,000 a year. John sells his home for a $1,000,000 profit. He can avoid tax on the first $500,000 of gain. John not only pays capital gains tax on the remaining $500,000 but also pays an additional 3.8% surcharge.  If John were selling his second home, there is no exclusion. Thus, he pays this tax on all gain.

This is a major bomb for those of you with substantially appreciated real estate. You might want to consider selling your home or second home before 2013.

Is news really news if it had already been anticipated? I'm referring to May's housing numbers, which everyone anticipated and which surprised few.  Existing home sales rose 12 percent compared to April's numbers.

Under more conventional circumstances I'd be tempted to break out the bubbly on such a bullish report, but we all know why home sales under contract spiked in April – impending expiration of the federal homebuyer tax credits.  The credits were a useful band-aid, to be sure, but they were no panacea.  They simply moved demand forward without aggregately increasing it, and they really moved it forward in April.

I'm even less tempted to break out the bubbly when vetting the latest national pricing data.  On that front, the Standard & Poor's/Case-Shiller home price index showed that prices of single-family homes were down 0.5 percent between February and March, the sixth consecutive month-over-month decline. Year-over-year prices are up 2.3 percent nationally.  Meanwhile, the median price on existing homes increased 4 percent to $173,100 in April while the median price on new homes tumbled 9.6% to $198,400, as those who took advantage of the tax credits did so with cheaper homes.

This isn't to say that I am discouraged.  I think the market is simply in a holding pattern at the moment, with inventory levels holding relatively steady at an 8-month supply on existing homes and at a 6-month supply on new homes.  Some reservation is understandable; no one is really sure how the housing market will react to standing on its own heading into the prime buying season.  I remain optimistic, because I think the data suggests it will keep moving forward.

Meanwhile, the refinance market remains robust, and why shouldn't it with rates on 30-year-fixed rate loans regularly found below 5 percent and rates on 15-year fixed-rate loans regularly found below 4.5 percent?  For many borrowers, it's an opportune time to save a lot of money over the long haul by refinancing to a 15-year loan from a 30-year loan.

Of course I'll warn once again that good deals don't last forever. The turmoil in Europe has helped push rates down a few basis points, but rumblings for change are emanating from the Federal Reserve.  Recent minutes of the latest Fed meeting show a growing number of its banks want to raise the rate charged to banks on emergency loans, which is a sign of confidence in the economic recovery.  It's worth remembering that as the economy improves, the opportunity to get a bargain-basement mortgage rate and home price decreases.

A popular investing aphorism states that housing markets must climb a wall of worry in order to advance. If anyone has had more worries than most in recent years, it's the homebuilders. Over the past two months though, they seem to be worrying a little less. The National Association of Homebuilders reported its housing market index – a measure of industry confidence – rose three points to 22 last month, posting its highest reading since August 2007.

Homebuilders are still far from euphoria: readings below 50 indicate negative sentiment about the housing market. The last time the NAHB's index was above 50 was in April 2006, and we saw how the ensuing four years played out. Perhaps the fact that homebuilders remain somewhat guarded bodes well for the industry's future. Still, many homebuilders are expecting improved sales and home buyer traffic in coming months despite the end of homebuyer tax incentives.

Continued price stabilization is helping to lift spirits as well. National home prices increased 1.7 percent in March compared to the same year-ago period, marking the second month of year-over-year increases, according to CoreLogic's home price index. Distressed sales continue to cloud the outlook, though CoreLogic noted that the longer-term forecast remains positive, with prices expected to rise nationally another 2.7 percent over the next 12 months.

Stabilizing and improving prices are also contributing factors to the surge in housing starts, which rose 5.8 percent to an 18-month high of 672,000 units in April. Of course, buyers eager for federal tax credits are another contributing factor, which has some pundits concerned about a precipitous drop in sales in coming months. Their concerns are not unfounded. Permits dropped 11.5 percent, which indicates many builders remain cautious (hence, the 22 reading of the latest NAHB confidence index).

The good news is that continued economic growth is more likely than not. The Federal Reserve expects GDP to grow by roughly 3.5 percent this year, up from its 3.1 percent forecast in January. Meanwhile, unemployment is expected to drop to the low 9-percent range. As the economy and employment recover, the Fed expects inflation to remain subdued.

Real Estate Investors Beware

As a fellow real estate investor, I was ecstatic to see the announcement from HUD Asst. Secretary David Stearns on January 15, 2010 that Section 203.37a(b)(2) was waived for a period of one year - through January 31, 2011. 

The reason behind this decision was simple.  The department of Housing and Urban Development  realized the significant negative economic impact many uninhabitable foreclosed homes have had on the real estate market.  By allowing the waiver of the 90-day seasoning rule, the inventory of these properties would surely decrease as investors are able to rehab and turn these homes in a reasonable amount of time.

Unfortunately the secondary mortgage market is not required to adhere to HUD and FHA "recommendations", and they aren't buying.  At the onset, I found very few lenders who would adhere or accept, either or both stipulations for FHA loans.  I experienced denials from Well Fargo, Bank of America, and SunTrust.  I figured there was a learning curve and they would come around, but now three months into this, the "bigs" still aren’t buying. 

Home buyers looking for a nice rehab property while utilizing an FHA loan are finding more success using local lenders and mortgage brokers.  These people have less bureaucracy and are more apt make the right common sense decisions.

If you are an investor it is critical to educate yourself, and use an educated real estate agent to guide prospects to successful financing.  There is nothing worse than going under contract (taking your listing off the market) for weeks only to find a finance contingency implemented.