Feb. 4, 2019
The Board of Realtors annual Forecast breakfast happened Friday, February 1. James Woods, University of Utah economist, shared his forecasts based on the fundamentals he is seeing in the market. Below is a snapshot of the 2018 market and the forecast for 2019. A further examination of causes for the forecast follows.
Salt Lake County’s residential real estate market benefitted from another year of strong demographic and economic growth and favorable, but slightly higher, mortgage rates.
- Single-family homes sold saw a slight decline of 1% (196 fewer sales)
- The median sales price of a single-family home is at $355,000, up 9% from 2017
- Condos, townhomes and twin home sales were up by 8%, the biggest year ever in sales
- The median sales price of condos, townhomes and twin homes is at $248,257, up 10% from 2017
Forecast for 2019
Slightly slower economic and demographic growth along with higher prices and interest rates will dampen demand in 2019. These conditions mean fewer single-family sales but more condominium and townhome sales as buyers seek affordable housing.
- Single family sales will decline by 8% while condominium and townhome sales will increase by 7%.
- Total sales of residential housing units will be down about 4%.
- The median sales price of a single-family home will increase 5-7% to around $375,000
- The median price for condominiums and townhomes will increase by 10% to $275,000.
While housing units sold will decline slightly, appreciation is still forecast to be a healthy 5-7% for single family homes and a very strong 10% for townhomes and condominiums.
A slowdown does not mean a correction. Slowing the appreciation growth helps keep us out of bubble territory. We still have a very strong market going into 2019. The housing shortage has not been solved and fewer homes may be sold due to increasing home prices and mortgage rates. Housing affordability is the main driver of the slowdown in appreciation.
Causes for 2019 Economic Forecast
While the most recent economic forecast (October 2018) shows continued solid growth, most indicators point to a deceleration in the rate of growth.
Some driving factors causing a slowing of growth:
- Slightly slower job growth, employment growth will slow from 3.3% in 2018 to 3.1% in 2019, still an impressive growth rate
- Slower demographic growth, Net in-migration is expected to be significantly lower due to the revised forecast
- Labor Market Gets Tighter - Unemployment rate to drop to 3% in 2019. In the past 70 years only two years, 2006 and 2007, have had lower rates of unemployment
- Increase in Average Pay Not as Strong - The 3.8% increase in average pay in 2018 - the largest increase since 2006 - is projected to decline to 2.5% in 2019
Signs of a slowdown
- Utah’s relatively strong economy will provide the Salt Lake County real estate market with a buffer to the anticipated slowdown in the real estate market.
- The first signs of a slowdown showed up in the last half of the year. Year over year homes sales declined from September through the end of the year with a decline accelerating to 12% in December.
- Price increases also weakened by November and December to 6%, which pulled the annual increase from double-digit territory to 9.2 percent
- The underlying causes of a slowdown are higher prices and rising interest rates. In other words, housing affordability
- The median sales price of a home in Salt Lake County has increased from $245,000 in 2013 to $355,000 in 2018
Rising Monthly Payment
Mortgage payment for Median Home Price in Salt Lake County and Utah
The adverse impact of higher prices and the interest rate on a mortgage payment and housing demand is driving some of the slowdown.
- In 2013, the mortgage payment for the median price home ($245,000) was 1,299
- In 2018, the mortgage payment for the median price home ($355,000) was $2,014
- A 55% increase in just five years
Outlook for Mortgage Rates
Most experts agree that mortgage rates will move about 5% in 2019. The interest rate forecasts of some of the largest housing and mortgage-related groups are shown below.