Linda Secrist & Associates Blog



2015 Salt Lake Housing Market Forecast

Reposted report from Salt Lake Board of Realtors by James Wood

A Sustainable Housing Market

A review of the 2014 real estate market’s performance shows:

Residential Sales – Over the past three years existing home sales in Salt Lake County have moved in a narrow range of 11,000 to 11,700 homes while multifamily sales (condominiums, town homes and twin homes) have been at 3,000 units for the past two years Figure 1. Historically, multifamily sales account for about 18 percent of total residential real estate sales.

In 2014 Salt Lake City captured about 30 percent of all single family sales followed at some distance by West Jordan, Sandy and West Valley. Combined, these four cities had 60 percent of the single family home sales in Salt Lake County in 2014 Table 1. Both Salt Lake and West Jordan had a substantial share of multifamily sales and were joined by two cities that had nearly as many multifamily sales as single family sales.

Housing Prices At 88% of Pre-Recession Peak

In 2014 housing price increases slowed from the sizzling pace of 2013. An example, of that sizzling pace; in the first quarter of 2013 housing prices were up 19.5 percent. But in the ensuing six quarters the increase in the median sales price steadily decelerated falling to only a 1.2 percent increase in the third quarter of 2014. In the fourth quarter of 2014 prices increased by 4.1 percent over the fourth quarter of 2013 (Salt Lake County). In contrast, the recovery in Weber County is lagging well behind the other counties.

While the 2014 median sales price of a home has recovered in nominal terms from the Great Recession the inflation adjusted price is at 88 percent of the pre-recession peak. The inflation adjusted peak price in the second quarter of 2007 was $291,000. The median sales price in the fourth quarter of 2014 was $255,100. Adjusting for inflation makes a huge difference in calculating the average annual growth rate in prices. For example, the inflation adjusted (constant dollars) annual growth rate in housing prices from 2000 to 2014 is 1.6 percent. The non-adjusted (current dollars) growth rate is 4 percent. It’s fair to say that housing prices in Salt Lake County increase at about 1.5 percent annually in constant or inflation adjusted dollars. Using constant dollars is a much more accurate measure of housing price performance over the long-term.

Constant and current median sales prices by quarter for existing single family homes in Salt Lake County from 2000 to 2014: Over this period housing prices have been extremely volatile, increasing from $205,000 (constant dollars) in the fourth quarter of 2004 to $291,132 in the second quarter of 2007, a real increase in the median sales price of 42 percent in two and a half years. From the peak, constant prices fell 33 percent in five years, finally hitting bottom in the first quarter of 2012 with a median sales price of $196,295. Over the next 18 months the median sales price rebounded 31 percent to $257,000 by the third quarter of 2013; a remarkably quick recovery. Since then prices have moved in a narrow range from $245,000 to $255,000.

Loss of Price Momentum Touches Every City in Salt Lake County

The loss of price momentum touched every city in Salt Lake County. Price change was actually negative in five cities in 2014; South Salt Lake, Holladay, Cottonwood Heights, Murray, and Riverton Table 4. Midvale had the only double digit increase in prices. Most cities had price increases between 4 and 6 percent. Draper had the highest median sales price of $405,500, which was only 2.1 percent higher than 2013. The median sales price in Salt Lake City was up a little over 6 percent in 2014 to $255,000, just a fraction of the 22 percent increase in 2013.

Affordable Housing Options Abundant in Salt Lake County Compared to U.S.

For those who qualify, housing is still relatively affordable in the Salt Lake metropolitan area. According to the Wells Fargo National Association of Home Builders Opportunity Index, a family of four earning a median income could afford two-thirds of the homes sold in the Salt Lake Metropolitan Area — that’s an opportunity index of 66. Nationally, the opportunity index is 61. When housing prices peaked in Salt Lake in 2007 the local opportunity index hit a low of 31. Again this is interpreted to mean that in 2007 the median income family could afford only 31 percent of the homes sold. An opportunity index number below 50 indicates less affordability; above 50 indicates more affordability. Overall the local housing market, despite the rebound in prices, is not overvalued. There is still room for moderate increases in housing prices provided mortgage rate increases are incremental and gradual. Fourth quarter mortgage rate forecasts from four major institutions predict higher rates by the end of 2015. They include: Fannie Mae at 4.4%, Freddie Mac at 5.0%, Mortgage Bankers Association 5.0% and the National Association of Realtors® 5.4%.

Mortgage Rates at 44-Year Low

The very favorable rate environment in recent years is highlighted in Figure 4. Over the last three years mortgage rates have been at their lowest levels in the 44 years of data (1971-2014). If the low mortgage rate period (2008-2014) is excluded, the median interest rate for the 36-year period from 1971-2007 is 8.4 percent. At that rate the mortgage payment on the median priced home ($255,000) in Salt Lake County would be $1,930 rather than the $1,240 at the current mortgage rate of 4.2 percent. Perhaps a more reasonable period is the 1990 to 2007 which excludes the historically low rates of recent years and historically high rates of the 1980s. In that case the median mortgage rate is 6.5 percent and the mortgage payment on the median priced home in 2014 would be $1,600, rather than the $1,240 at current rates; a payment increase of 30 percent. For those households that qualified, the historically low mortgage rates provided a rare opportunity to capture long-term savings in their housing costs

Mortgage Interest Rates Will Increase This Year

Rate increases are never good for the real estate industry but a sudden spike in rates is very unlikely particularly given the very low rate of inflation and recent drop in oil prices. The Federal Reserve has repeatedly stressed their patience and caution. For the past year Federal Reserve officials have indicated they expect to raise short-term rates by mid-2015. The Fed has held short-term rates near zero since December 2008. U.S. job growth in 2014 — the best year of job growth in 15 years — supports a move by the Fed to raise rates but sluggish wage growth worries Fed Chair Janet Yellen. Some believe that the loss in demand due to higher mortgage rates will be offset by an easing of mortgage lending standards. Federal regulators have recently relaxed some provisions of Dodd-Frank that threatened access to mortgage credit. Modestly relaxing tight lending standards could boost housing demand by as much as 15 percent

Residential Sales in Salt Lake County in 2015 to Rise 7%; Median House Price to Increase 4%

Forecast - Despite a few challenges the outlook for the Salt Lake County real estate market is positive in 2015. Residential sales will increase by 7 percent to 15,500 sales and the median sales price will increase by 4 percent to $265,000.

Solid Economic Outlook for Salt Lake in 2015

Market fundamentals point toward a solid real estate year in 2015 supported by the following:

Linda Secrist - Linda Secrist & Associates - Whatever They Touch Turns to Sold


4 Places To Organize When Selling Your Home

Trying to Sell Your Home? De-cluttering is a Must!

Clutter in a home depleates the space making it look smaller and less valuable. Learn how you can increase the value of your home, by maximizing the space in 5 areas of your home.

Closets

A disorganized closet screams to buyers that there is NO SPACE! Buy shelves, drawers, and shoe racks to take control of your clutter and show the optimal space your closet has to offer!

Attic

Your attic should not be a place to store unwanted junk and boxes. Turn this underused space into a storage heaven, or better yet a bonus room for guests!

Basement

If your basement is unfinished use it for organized storage space, or finish your basement and turn it into optimal living space. A finished basement is an instant home value booster!

Kitchen Pantry

As cooking at home is becoming more and more popular to homeowners, a kitchen pantry has become a very valuable asset to the home. Adding products such as spice racks, and canned food organizers is sure to be a plus to prospective buyers.

LINDA SECRIST - LINDA SECRIST & ASSOCIATES - EVERYTHING THEY TOUCH TURNS TO SOLD!


4 Tax Tips for Real Estate Investors

Looking for ways to benefit as a Real Estate Investor? Well, tax season is here and we have provided some tax tips for Real Estate Investors that will help you get the most out of your real estate holdings.

Tip #1: Establish an investment property as your primary residence.

If you turn your investment property into a primary residence. you can avoid capital gains tax altogether. To make this work, you must spend 2 years (or 730 days) living in the home in the last five years. The time doesn't have to be sequential. You just need to establish residency, then you're eligible to sell the home and can make up to $250,000 in capital gains ($500,000 if married filing jointly) without paying any taxes.

Tip #2: Hold on to properties for more than a year.

TV shows glamorize quick house flipping techniques as they flip a house in a matter of weeks, however when this happens so quickly a large portion of the profit will go straight to the IRS unless you hold a property for a year or more.

Captial gain is considered to be any investment profit and is tax based on the amount of time you've owned the property and on your income.

You'll be charged the income tax rate of 35 percent or more if you hold an asset for less than a year. If you keep a property for more than a year, you'll qualify for long-term capital gains taxes, which normally top out at 15 percent.

Tip #3: Be prepared for business taxes.

Don't be surprised if the IRS consider your several real estate transactions per year as business or trade rather than an investment strategy. While the circumstances may vary from case to case, if you're earning more than half of your income from real estate, your earnings will change from 'capital gains' to a means of producing income that's subject to ordinary tax rates. Plus, there's an additional 15.3 percent in self-employment taxes.

Tip #4: Do a like-kind exchange.

A like-kind exchange is a good option if you are wanting to avoid capital gains taxes, but you want to get a new property. The provision (also known as section 1031 exchange) allows you to 'exchange' one property for another of similar value and defer the tax bill.

Both the property you give up and the one you receive must be used for investment purposes, trade or business in order to qualify. The exchange of any real estate for another piece of real estate, regardless of either's quality is like-kind. It also must be 'like-kind,' or an exchange of two. While you can exchange a parcel of land in the city for a dairy farm in the country, you couldn't exchange that same city parcel for say, a flat-bed truck.

You can also do a tax-free exchange of a rental property that has been used for personal purposes for a similar piece of property, (this came into effect back in March of 2008.) You must have owned the property for 24 months before the exchange, and must have rented the home for 14 days or more in order to qualify. You also cannot have used the property for more than 14 days or 10 percent of the time it was rented in the past two years, whichever is greater.

Remember if and when you decide to sell the property you exchange for, you'll likely owe taxes. Like-kind exhanges will only defer your tax bill.

LINDA SECRIST - LINDA SECRIST & ASSOCIATES - EVERYTHING THEY TOUCH TURNS TO SOLD!


SIX Urgent Home Fixes NOT to be Ignored

It is easy, especially in this economy, to be tempted to delay or even skip minor home maintenance repairs, cleaning jobs and inspections in your home. But don't be penny-wise and dollar-foolish. That $200 or $300 you save today could result in expenditures of $3,000 or even tens of thousands next month or next year if hidden problems in your home go unnoticed and become worse.

Consider coughing up a little dough to take care of these small jobs before they morph into gigantic, expensive jobs later.

1. ANNUAL HVAC INSPECTION:

Cost: $200-$300, depending on where you live.

How often: at least once a year.

When: spring or fall. Heating, ventilation and air conditioning, or HVAC, companies aren't as busy, and you're not in dire need of heat or air conditioning.

What an inspection might find:

The furnace blower is not working properly. Cost to repair or replace: $100-$150. Possible consequence of letting it go: a broken heat exchanger. Potential savings down the road: $300-$1,000 to replace the heat exchanger or $750-$3,500, depending on the energy efficiency, to replace indoor or outdoor furnace components.

The reversing switch in the heat pump is broken. Cost to repair or replace: $100-$300. Letting it go results in no heat from the heat pump, and the system switches to a more expensive auxiliary heat. Potential savings: lower heating bills.

2. CHIMNEY INSPECTION

Cost: $65 for an inspection; $150 for inspection and cleaning, including removal of creosote buildup, which may lead to a chimney fire.

How often: once a year.

When: before your first fire in winter.

What an inspection might find:

There's no chimney cap. Cost to add: $150. If you let it go, rain water can get into your chimney, damage the chimney liner and damper, and even saturate mortar joints -- causing mold. Potential savings: $2,000-$4,000 to replace the chimney liner.

Other problems may include: a cracked chimney crown, which can be repaired for $300-$500; chimney flashing that needs caulking, which can be done for $80-$100; and waterproofing the exterior brick, $350-$600. All these fixes will prevent rainwater from getting in and mold from forming.

3. TERMITE INSPECTION

Cost: $75-$200 for an inspection; $200-$300 for a termite protection contract for qualifying homes with no current evidence of termites to cover treatment and repairs for any later infestation.

How often: once a year.

When: any time, although termites are more active in spring and early summer.

An inspection might find subterranean termites that come from the ground or flying termites. If left untreated, these bugs damage framing, trim, drywall, furniture, carpet, copper and other soft metals. Termites cause more than $5 billion in damages a year in the U.S. The average homeowner loss for termite damage is $3,000, but losses can be as high as $30,000 or even $80,000. Most homeowners insurance does not cover repair of termite damage.

4. POWER WASHING AND SEALING WOOD DECKS AND PATIOS

Cost: $100-$300 for a 200-square-foot deck, more for a larger deck.

How often: every one to three years, depending on the amount of traffic, moss and mold.

When: any time in sunny weather.

Power washing gets rid of stains, algae, mold, mildew and moss. Algae and mold can make your deck slippery and dangerous. Sealing your deck after it is cleaned helps prevent water damage. Wood soaks up rain like a sponge, expands and then shrinks, Lee says. Sealing makes the water bead up and roll off. And let's not forget -- your deck will look nicer, too.

If you let it go, your deck will warp, nails will pop out and the deck won't last as long.

Potential savings: $4,000 to $20,000 or more to replace your deck, depending on size.

5. DRYER VENT CLEANING

Cost: $120-$200.

How often: every year.

When: a sunny day.

The purpose is to get rid of lint buildup. If your dryer is not on an exterior wall, it's likely that the vent leading outside is clogged up, says Gessner of A Step in Time Chimney Sweeps.

If you ignore it, the result could be a disastrous fire. Once the vent gets clogged, the dryer starts overheating and it can catch on fire.

Potential savings: your home, your furnishings, your belongings and your life.

6. CARPET CLEANING

Cost: about 50 cents per square foot for hot water extraction cleaning, or $500 for 1,000 square feet of cleaned carpet.

How often: every 12 months; more often for high-traffic areas and homes with small children, pets or smokers. Manufacturers' warranties may require cleaning every 18 to 24 months. You can save money by focusing on regular cleanings for high-traffic areas and waiting up to two years for the entire carpet.

When: any time.

If the carpet looks dirty, you've waited too long because some soil can't be removed with vacuuming. This soil will bind to your carpet and dull the texture, shortening the life of the carpet.

Your home also will be healthier with pollen, bacteria, insecticides and dirt removed, says Howard Partridge, founder and president of Clean as a Whistle, a cleaning company outside Houston.

Potential savings: extending the life of your carpet. Replacing 1,000 square feet of medium-grade carpet, including padding and installation, costs about $3,000.


Avoid The 4 Biggest Mistakes Made By First Time Salt Lake City Home Buyers

First-time homebuyers almost always make a few mistakes when buying their home. Whether they simply paid too much, chose the wrong type of mortgage or forgot to budget for needed home improvements and repairs. Working with a trustworthy, experienced lender can help prevent such mistakes. But consumers also need to take responsibility for their budgets and choices.

Following are the four biggest financial mistakes of first-time Utah homebuyers:

Lenders qualify buyers based on their incomes and debt-to-income ratios without considering how much the borrowers spend on items such as transportation, savings, food and other necessities.

1. Too many first-time buyers believe their income will continue to grow and are so excited about buying a home that they borrow the absolute maximum they can afford instead of allowing themselves wiggle room for a partial loss of income or for future expenses such as potential flood or other household disasters, children or health problems.

It's a good idea to review how much you want to spend each month on housing prior to meeting with a lender.  In other words, create your own individual budget and know your limits at the time of purchase. It's not a good idea to spend more on a home on prospect of potential increased future income.

Meeting with a lender for a buyer consultation and prequalification for a mortgage should be the first step toward homeownership. Yet many first-time homebuyers wait until they are ready to start house hunting before contacting a lender.

2. It is never too early to set up a free buyer consultation with your lender.  Every buyer needs to get prequalified early enough in the process so that they can make some changes if they need to or correct errors on their credit report.  Some buyers may need to spend a year saving more money for their down payment, increasing their incomes or cleaning up their credit before making an offer on a home.

A score of 680 to 720 can get you good mortgage rates, while a FICO score of 620 is usually about the lowest score to qualify for most loans and will not earn you the best interest rate.

While most consumers know it's important to have a high credit score, not everyone understands how costly a low score can be. All mortgage lending is done with a tier of interest rates and terms based on consumer credit scores. A credit score of 720 or above will earn you the best rates and can potentially save you thousands of dollars over the term of the loan. Websites such as Bankrate provide information about how to improve your credit score.

3. Another important thing to avoid that is often overlooked: Even after a mortgage approval, consumers must AVOID applying for new credit or taking on new debt, because a second credit check is often required before settlement.

4. Get the loan that fits your needs. No need to pay a premium for a 30 year fixed rate mortgage if you know your company will relocate you within 5 years.  A 5/1 Arm may be your best option in this case.  First-time homebuyers today typically opt for a 30-year fixed-rate mortgage. Their conservatism is a reaction to stories about the dangers of interest-only mortgagesand adjustable-rate mortgages. Home loan alternatives to a 30-year-fixed sometimes make more sense.

Homebuyers eager to build equity in their homes or who are older and want to live mortgage-free in retirement should consider a 15-year fixed-rate loan or, if they can afford it, even a 10-year mortgage to reach their goals.

LINDA SECRIST - LINDA SECRIST & ASSOCIATES - EVERYTHING THEY TOUCH TURNS TO SOLD!


See Why Draper Homes Are Now For Sale at Their Best Values

Draper and the homes therein enjoy one of the most beautiful settings of any city along the Wasatch Front. As a business community Draper and its real estate is poised to become an economic powerhouse in the next few years, due to its geographic location halfway between Salt Lake and Utah Counties. “Whatever your needs, Draper is a great place to visit, a great place to do business and an even better place to live!” Draper homes are second to none.

How Salt Lake Real Estate is Attracting Relocated Buyers

Salt Lake is located midway between Ogden and Provo. Salt Lake City is the capitol of Utah, comprising many communities and neighborhoods, from the sleek downtown condo to the urban ranch home with adjacent stable for the horses. Real Estate in Salt Lake makes the perfect investment in your future. The “Greatest Snow on Earth” isn’t just a saying in Salt Lake, it’s the truth. People come from all over to experience the powder that is unlike anywhere else.

While living in Salt Lake you will experience all four season. A snowy winter, a beautiful spring, warm summer, and a colorful autumn. Many potential buyers love Salt Lake real estate because you can have a white Christmas. And having a ranch with attached garage makes the snow even more fun. Real estate in Salt Lake offer great views, in a valley surrounded by mountain ranges it’s hard not to love what you see.

What There is About Holladay Luxury Homes for Sale That Excites Buyers

In Holladay you get the best of all worlds. It’s a great place to live work and play! Buy homes for sale in Holladay and see what all the hype is about. The educational system is one of the finest in the United States.

The community is friendly to newcomers, so don't be at all surprised if you're hailed on the street like an old friend, while someone you've never met whiles away a few minutes discussing the state of the union.

Holladay has a lot to offer the newcomer to their community, and welcomes you for a visit to find out why we're one of the best little towns in Utah. When it’s time for you to relocate, or you simply want a break in a friendly community, why not come home to Holladay?