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DESPITE DROP IN SALES, S.L. HOME PRICES RISE 10%

SHARE DESPITE DROP IN SALES, S.L. HOME PRICES RISE 10%

For the first time in four years, residential real estate sales by members of the Salt Lake Board of Realtors declined in 1993, reports Randall Eagar, board president.

Despite the drop in overall sales, house prices increased more than 10 percent during the year.Eagar said single-family home sales declined 24 percent last year from 1992, while condominium sales were down 21 percent.

"At first blush, one might come to the conclusion that the market is slowing down," Eagar told industry professionals at Little American hotel Monday, gathered for the Board's annual Economic Forecast Breakfast.

"Actually, the slowdown in sales is more of an anomaly," he said. "The market has paused to make up for the tremendous increases of the past three years."

The multi-unit apartment market, sent into a tailspin by the 1986 federal tax overhaul, declined 18 percent in 1993, but Eagar noted that the decrease was less than that of single-family or condo sales - an indication that the apartment segment is gathering strength.

Residential lot sales were down 26 percent last year as wholesale buying of building lots by developers and builders took what Eagar described as "a conservative but healthy turn."

Eagar said real estate appraisers have noted that, in the normal real estate cycle, home sales decline in the winter, then accelerate in the spring. "This normally undeviating maxim continued (in 1993), with a slight decrease in the fourth quarter."

Geographically, the average east-side home sold for $132,450 last year, compared with $74,232 for the average west-side residence. Eagar said east-side homes not only had higher average values but also the most consistent increase in value.

This is mostly a phenomenon of supply and demand, he said, as most of the eastern valley land has been developed. As a result of the scarcity, building lots in choice areas command premium prices from $120,000 to $200,000.

Helping fuel the east-side surge, he said, is that fact that builders continue to respond to the upwardly mobile "yuppy" market that demands larger, newer homes. The result is that a larger percentage of homes in the area are priced in the $150,000 to $250,000 range and higher, with upper-end sales posting their largest gains ever.

In Holladay, the average sales price of a home jumped to more than $175,000, up 47 percent over 1990, while the Olympus Cove area has seen a 50 percent increase in the same three-year period, to more than $235,000.

With most of the available land in the valley located on the west side, area developers have been concentrating on first-time homebuyers. As a result, new home starts have been in the $55,000 to $65,000 range.

The overall result has been what Eagar characterizes as a "phenomenal" 10.4 percent increase in local housing prices in 1993, exceeding the board's forecast for the year by 2.4 percent.

For a longer perspective, the average Salt Lake Valley home sold for $66,521 in 1980 compared with 1993's $106,918, a 61-percent increase.

For 1994, Eagar said the Board expects local home prices to climb 6 percent to 8 percent over 1993 levels, a result of continuing low mortgage loan rates and relatively low inventories of available housing.

Eagar cautioned that strong appreciation in housing prices has, historically, been followed by declines.

"Housing markets that increase in quantum leaps - typically over 10 to 15 percent - increase skepticism and concern. This eventually leads to just as radical declines" such as have been seen in Southern California, Washington state and the Northeast sector of the country.

Nevertheless, inventories of homes for sale in Salt Lake County are at their lowest level in 15 years, he said, plunging 42 percent over the past six years from 24,000 homes available in 1987 to only 14,000 in 1993. This creates a seller's market and should help keep valuations high.

Eagar terms the current situation the best of all possible conditions for both buyers and sellers: Sellers have the best opportunity in 15 years of selling their property at "realistic market value." For buyers, the affordability of housing - thanks to low interest rates - remains near record levels.