REAL ESTATE April 27, 2018

Park City Renters: Are You Ready to Buy a Home and Stop Seeing Rent Go Through The Roof?

Should I Buy Now?
After years of record-low interest rates (hello, 3%!), the Fed is finally making some noticeable increases: The rate for a 30-year fixed mortgage broke the 4% mark last year. And with economic growth continuing to carry momentum, The predictions we’ll see at least two to four more rate increases throughout 2018. Rates are anticipated to hit 5% by the end of the year.
The big story there is that those increases will further constrict affordability, The more buyers wait, the more expensive it will get to buy—not just because of home prices, but because of inflationary pressure.
In other words, if you want in on the American dream, now is the time.
Home prices have soared over the past few years, pricing otherwise well-positioned buyers out of high-cost areas and leading some experts to cry “bubble”. But in 2018, price increases are expected to moderate.
Home price increase of 3.2% year over year, after finishing 2017 with a 5.5% year-over-year increase. Existing-home sale prices are predicted to increase 2.5% year over year.
Of course, it all depends on where you live. While red-hot markets such as Park City are predicted to finally lose some steam, sales numbers and home prices are poised to climb in Heber City, Utah, where economic momentum continues chugging along and new construction is happening in the right price points.
An inventory shortage has plagued the U.S. housing market since 2015, forcing some buyers to Utah and keeping others out of the buying game entirely. But by fall 2018, the tides will begin to turn, with markets such as Heber City recovering first.
The majority of inventory growth will happen in the middle- to upper-tier price point, in the ranges of $350,000 and $750,000 and above $750,000.
New home construction has expanded. But that will happen slowly, thanks to a constricted labor market, limitations on the amount of lots and land that’s available, tight bank financing for building loans, and a run-up in building material prices.
It’s been a slow climb back from the recession, and now we’re confronting all of these limiting factors and supply-side constraints.
As we head into 2019 and beyond, I expect to see the inventory increases take hold and provide relief for first-timers and drive sales growth.

Where rent prices are going?
The average rent for an apartment in Park City is $1,147, a 3% decrease compared to the previous year, when the average rent was $1,185.

Studio apartments in Park City rent for a month, while 1-bedroom apartments ask on average $1,000 a month; the average rent for a 2-bedroom apartment is $1,110.

Utah’s growing economy is great for business, but it’s creating an affordability crisis for renters. I have found as more people move to our town, the demand for apartments has outpaced the supply, pushing up rents faster than wages.

It is definitely difficult to find something that most can afford. The cost of living is so high — it’s not just some apartment complex’s, it’s apartments all over the town of Park City.
Federal data show  rent has risen 20 percent, on average, since 2010. Over the same time period, a two-bedroom apartment in Park City increased 24 percent. The data show two-bedroom prices in Old Town Park City has jumped 42 percent.
The Current Market

Here are a few of my insights. If you have questions about a specific neighborhood not mentioned here, I invite you to contact me.

***One statistic that is consistent in every neighborhood is a decrease in inventory and a decrease in the average days on market. Overall, inventory is down 22% and average days on market is down 7%.

My Take: If you own a home that is not selling in this market, I would suggest strategizing with your real estate agent.

***The median single family home sale price rose 4% from 2016 to 2017. This includes our entire MLS market (everything from Summit Park to Deer Valley and the Heber Valley). However, in Park City’s 84060, the median sale price rose 16%. In Park City’s 84098, the increase was only 3%.

My Take: This disparity does not make any sense without a closer look into the numbers. I think I have it figured out. Promontory, which accounts for a large number of single family home sales in 84098, closed an inordinate amount of their developer cabins in 2017. Some of these cabins were sold at 2016 prices during pre-construction. This large number of cabin sales dropped the median sale price at Promontory by 14%, while the average price per square foot increased by 7%. Prices are definitely not going down at Promontory or in 84098. Don’t let these numbers deceive you.

***Jeremy Ranch had 66 single family home sales in 2017, an increase of 27% from 2016. Pinebrook had 44 sales, which as flat from 2016. In contrast, Silver Springs only had 29 sales and Prospector only had 13 sales.

My Take: In my opinion, this is a function of inventory. Silver Springs inventory was down 63%. There were hardly any homes for sale in Silver Springs and Prospector, driving buyers into Jeremy Ranch and Pinebrook.

***In contrast to the median single family sale prices in Park City’s zip codes, the 2017 median sale price was $410,000 in Heber/Daniels and $529,000 in Midway.

My Take: I predict that as prices continue to rise in the Park City zip codes, buyers will look to the Heber Valley as an affordable alternative.

***Deer Valley does not suffer from the same inventory issues as other locations.  Over the last 24 months, single family home inventory increased by 18.5% and the number of homes sold during that same period decreased by 36.7%.

My Take: Lower Deer Valley is an area of opportunity for single family home buyers. It is more of a buyer’s market than other parts of town. Many of the homes are dated, providing an opportunity to personalize and update at below replacement cost. Further, the addition of the new “Ikon” ski pass that will be honored at Deer Valley resort, should encourage new visitors to the area.