Real estate utah
real estate markets, driven by the economic and political influences, have seen sharp declines in most of the US, in recent years. Property sales and prices are plunging to new lows month after month. Most experts believe the real estate market is influenced more by local factors, and market conditions may vary from city to city. The real estate market in utah serves as a classic example.
While the real estate markets in rest of the nation were reeling under the effects of sub prime crisis, Utah registered impressive growth in home sales and prices. The strong economy and demographics have helped. Utah withstand the ill effects of the sub prime market melt down.
Utah is consistently outperforming other states in the country with regards to home appreciation. Home prices in Utah increased by; 12.9 percent in 2007, as compared to 1.8% increase at the national level.
The growing population, new employment opportunities and availability of credit had been the key factors driving the robust real estate market in Utah . The presence of export and manufacturing units has the potential to maintain growth for the next few years and beyond. The defense spending and the educated work force are other factors that will sustain market growth in coming years. Government initiatives, such as a home-buyer tax credit and permanently higher loan limits for conforming and FHA loans could also buoy up the market.
Growing population augurs well for real estate
Utah has seen increased job opportunities in the recent years, with many manufacturers setting up a base in the state. Utah unemployment stood at about 2.6 percent as compared national average of 4.6 percent. The growing job market and quality amenities in the state have drawn a sizeable drift of domestic migrants to Utah .
Population in Utah is estimated to reach 2.9 million by 2010, growing by about 84000 people a year, on an average. This indicates that roughly about 25,000 to 30,000 new households will be needed every year.
Affordability - A threat to the market
In the coming years, affordability could restrain the growing market, despite the strong demand for homes. Family incomes have not been keeping pace with the increase in home prices. The strict standard for borrowing, following the sub prime mortgage crisis has made it difficult for potential homebuyers to qualify for a home loan.
Such glaring trends in the market point out the need for new types of housing that could meet the demand and solve affordability issues.
Glance at the Residential Market
Many analysts expect the credit crisis to cause a slow down in the Utah real estate market this year. The higher end housing market is unlikely to appreciate this year. The excessive supply of new homes in the lower segments is likely to soften the market.
">The appreciation this year could be modest when compared to the previous two years. Median prices in Salt Lake, the largest metropolitan area of the state, are likely to make minor gains of about 3.8%. Provo, a strong market with charming mountain views, is also estimated to appreciate moderately by 3.1%. Prices in Ogden and Logan are expected to grow by about 2.7% and 2.4% respectively.
Commercial Market outlook
Commercial market, unlike the residential markets show no signs of slow down.
New retailers and retail chains such as Cheesecake Factory, Chipotle Mexican Grill, Urban Outfitters, American Apparel, Ashley Furniture and Steve & Barry\\'s have occupied 1.5 million square feet of the new space in the previous year. The vacancy rates in retail have also declined in the last two years. With other retailers such as Whole Foods Market, Sunflower Market, El Pollo expected to come in, more of the new retail space is likely to be consumed. However the new construction is estimated to grow at a slower pace, as the retailers across the country are now a little cautious about the expansion plans.
The industrial land prices have increased nearly hundred percent in the last three years. Many manufacturers are turning to utah for their production plants, considering the central location and the proximity to the densely populated areas on the west coast. Despite the gloom in the market, utah is likely to experience only a minor set back in the overall industrial market
The office space segment features strong absorption, low vacancy rates and lower construction rates when compared to the national levels. Office vacancy is stable at 11 percent. Medical space and research parks are likely to be the prime segment with increased activity in health services and research. An additional 1.1 million square feet will be available in the market with fourteen new office buildings to be opened in this year at Salt Lake County. Campus style class A office parks will be the new trend in office space.
Investment property has also been posting impressive growth in the past few years. Apartments seem to be the most popular choice with the investors.
With more and more out-of -state investors preferring the state, Utah will continue to remain one of the best investment options in the west.
Shades of gloom
The insulation that Utah s market received from the demographic factors is waning this year. Utah is just beginning to experience the slip in prices. Some analysts expect the market to tumble 25-40% over the next three years.
Some believe that the Utah market boom was caused by fraudulent appraisers and investors, who pull out of the market as soon as the market inventory has doubled. This could lead to decline in prices.
The risky option arm mortgages that have been popular with sub prime borrowers in the recent years could contribute to the decline in the markets. There are fewer buyers now; following the sub prime crisis and credit crunch has eliminated away 30-40% of genuine buyers. The increase in non-owner occupancy rate indicates that the boom is caused by speculation and the market can give away anytime. Additionally, the growing numbers of short sales and foreclosures point towards a decline in real estate prices.
Although a little sluggish this year, the cheer in the market is not lost. The current market condition makes it harsher for both buyers and sellers. Buyers should expect tougher standards to qualify for credit. Sellers should be prepared for lesser prices as buyers are well positioned in todays market.
All said and done, considering the states long term economic outlook, Utah could still be an undiscovered gold mine.
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