Utah Mortgage Activity: No Signs of Slowing Down
From Santaquin to Alpine, the Utah housing market is hot.
How hot?
Three years ago, a $250,000 residence was a premium home in Utah Valley. Now, the average sale price of a house in the area is $254,000, according to The Deseret News.
In fact, the number of valley homes sold for at least $500,000 jumped from 95 three years ago to 368 in 2006.
Real estate expert Kevin Call now tracks the valley’s high-end housing market by counting the million-dollar homes: 44 sold last year, 73 on the market right now.
The surge is jacking up home prices at the bottom end of the market, too; great news for homeowners - but bad news for would-be Utah mortgage applicants who now can’t afford most of the properties in the Valley, said Call, executive vice president for the Utah County Association of Realtors.
How bad is the housing affordability gap?
Only 3 percent of homes on the market right now are listing for less than $160,000. Moreover, 90 percent of all houses on the market this week list for $200,000 or more.
“That’s an affordability problem in our marketplace,” Call told the Provo Kiwanis Club on Tuesday. “If you are a schoolteacher in the Alpine School District with five years’ experience and a master’s degree, you can’t qualify for 90 percent of homes on the market unless you have a second job or a spouse that works.”
Don’t expect new construction to ease the problem, either.
“You can’t find a new construction home for under $160,000,” Call said. “Even downtown Eagle Mountain has passed that threshold.”
The reason is a stark leap in lot prices. For example, in 2004, a lot in the Val Vista subdivision in American Fork sold for $75,000. Last year, a nearby lot that was the same size sold for $149,500.
The affordability situation is compounded by a low inventory: Only a small supply of homes are for sale for less than $160,000 or even up to $200,000. Adding to the problem? Rising mortgage rates in the state.
“The group that can handle the least competition is facing the most competition,” Call said of lower-income home buyers.
The good news is that homeowners are seeing an excellent return on their investments.
Last year, half of all single-family homes in Utah Valley sold for more than $213,075 in 2006, and half sold for less. That median sale price was up 33 percent from $160,000 at the end of 2004.
The median price in Orem jumped from $151,525 to $180,000 over the same period. In Provo, it went from $143,450 to $170,000. The highest appreciation was in the Highland-Alpine area, where it grew roughly 23 percent last year alone.
“I expect 2007 to be approximately the same in unit sales as it was in 2006,” Call said. “I expect prices to increase, but certainly not at 22 to 24 percent. Our market is beginning to settle, to stabilize a bit. I believe that’s healthy for our market.”
We’re sure local mortgage brokers, with their increased business, would agree.