The home stretch: homebuyers and investors are competing for a dwindling housing supply.

AuthorWebb, Gaylen
PositionBusiness Trends

Utah's residential real estate industry has pulled back from the brink. Most indicators are positive, with the number of sales and median home values on the rise.

But there is still one fly in the ointment--low inventory levels.

Salt Lake County, for example, currently has a 3.9-month inventory of homes for sale, creating a very difficult market for buyers. "In some situations it is really competitive, and if you aren't the first or second person there, you may not get the house," says Ryan Kirkham, principal broker for Kirkham Real Estate and vice president of the Utah Association of Realtors.

Anything below a six-month inventory is essentially a seller's market.

"If we stopped putting any homes on the market right now, it would take five months to go through all inventories in the state, based upon buying patterns," explains Cal Musselman, president of the Utah Association of Realtors.

In this environment, buyers have less negotiating power; and with interest rates and home values trending upward, time is not on their side.

Looking to Buy

But housing is still highly affordable for buyers. Indeed, the market truly has paused at a moment of balance for buyers and sellers.

"During this past year, we saw the highest affordability on record going back to 2000," says Musselman. "And interest rates have only ticked up less than 1 percentage point (78 basis points) since last year, causing only a slight decrease in affordability since that record. The current market is actually in the rarest of rare moments when it is both an excellent time to buy and an excellent time to sell."

During the recession and recovery, people couldn't afford to put their houses on the market--either they were upside down or they were uncomfortable with their property values, he says. Today, values have increased enough for sellers to feel comfortable about putting their homes on the market.

In fact, Utah home values have increased for 14 consecutive months, according to Musselman. Homes in Wasatch, Iron and Washington counties experienced the greatest increases in value, with median prices up 32 percent, 24 percent and 20 percent, respectively.

"I suspect there will be more houses put on the market as values increase," Musselman says, "but fence-sitting buyers have finally come into the market in a big way, and they are gobbling up inventory."

The Salt Lake market has been "especially crazy." says Kirkham. He is experiencing a sense of urgency from buyers right now as...

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