After enduring four years of extreme volatility, the housing market seems to have stabilized to an extent. We have seen marginal improvements to home values with hopes of gradual improvement, but several threats to the housing industry still lurk. Some of the valley’s areas are likely to improve this year as well, so lets look at the pros and cons of the Salt Lake housing industry.
Lets look at the positives first.
- Down town Salt Lake City has seen revitalization due to City Center and renovations to the general area. Home values, including Condominiums seem to be on the rise as interest in the area has spiked. I believe the down town area will continue to improve in value over the course of 2013 with Condominiums making a bit of a comeback in the area.
- Interest rates have remained steady thus far. If they continue to stay low it will enable masses of new homeowners to enter or re-enter the marketplace.
- Bar any unforeseen issues it appears that the market has bottomed out for the most part. This means more potential homeowners have interest in buying now that the fear of losing equity is largely resolved.
There are still some potential problems lurking ahead that could result in new volatility in the market.
- FHA is under fire for being in the red. The agency is required to federal law to keep a 2% reserve. Due to the ongoing foreclosures and defaults FHA may need a federal bailout of up to $16Billion dollars. Should FHA face the instability and uncertainty the rest of the industry has it will shake up the entire housing industry as it is- along with HUD partners VA and USDA housing- the last source of low down payment financing for Americans.
- The newly organized Consumer Financial Protection Bureau (CFPB) may be headed for big change over the course of the year. The CFPB interim appointee was never confirmed by the senate, and in unrelated lawsuits federal courts have recently ruled that new rules coming from agencies overseen by an unconfirmed appointee must be retracted. The CFNP has never had a confirmed appointee in charge, so the agency may be starting over again. This could result in positive or negative change, what we know for sure is that change is still likely- and change usually results in uncertainty.
- Nothing strengthens the economy like a free market does. The ongoing changes and upheavals in the mortgage industry has kept most home lenders from introducing new product lines or offering any mortgages that are not being backed by HUD, Fannie or Freddie. This means there are fewer resources available to consumer, thus fewer consumers that can buy homes. This factor will continue to limit housing growth unless lenders feel confident about being able to open up its portfolio of loan products. Nothing in the foreseeable future suggests regulators will allow free market lending in the future, and nothing suggests lenders will change their current approach to mortgage lending.
All in all we believe the Salt Lake area will see moderate growth this year, but do not expect to see a strong comeback in 2013.