The year 2011 will be highlighted by improving home sales and stable real estate values, according to two economists who spoke to Salt Lake REALTORS® earlier this week. 

Lawrence Yun, chief economist of the National Association of REALTORS®, spoke to the assembled REALTORS® about the return to normalcy in the real estate market while James Wood, director of the University of Utah’s Bureau of Economic and Business Research, shared a study describing real estate conditions in Salt Lake County.

“In a nutshell, I think the worst of the housing market is over and an improving economy will bring a steady stream of buyers into the market,” Yun said. “Things appear to have bottomed out.”

Much of this optimism is based on improvements in both the national and state labor markets. Although the pace of job creation is slower than preferred, it is headed in the right direction.

“Utah has a much faster population growth and much faster job market growth compared to the rest of the country,” Yun said. “And that’s a good thing for real estate because one sees that a robust real estate market is always dependent on the health of the job market.”

In 2009, Utah lost more than 60,000 jobs, the most serious decline since the Great Depression, according to Wood’s report. Recently, however, growth has picked up and job gains have been reported every month since May. Should the rate of increase pick up from the current 1 to 2 percent, the real estate market would see even faster improvements.

“An expanding job market is essential for a recovery of the real estate industry and the repair of housing demand,” wrote Wood. “Good news about jobs will reduce uncertainty for home buyers and sellers, help boost net in-migration and provide the means for some of those doubled-up households to reenter the housing market.”

For 2011, the Utah Department of Workforce Services says the number of jobs will increase by 17,000, with another 28,000 to be added in 2012. Every sector, except mining, is expected to grow, including residential construction which will see job gains for the first time since 2005.

For both the U.S. and Salt Lake County, home prices are expected to see no significant change during the upcoming year, according to Yun and Wood. Although Salt Lake home prices have improved in the past few quarters, values will be prevented from making any meaningful upward movement because foreclosures and short sales will continue to be part of the market, Wood said.

Along with prices, home sales are also expected to improve. On a national level, Yun said home sales will be choppy, but improving overall in line with job growth. A sharp rise in the Gross Domestic Product would result in more robust sales activity.

Over the past three years, Utah home sales have been stuck near 30,000 to 31,000 units, down from more than 40,000 units in 2007 and nearly 48,000 in 2006. While there was some promise of recovery in late 2009 and early 2010 as sales surged, the drop-off that came with the expiration of the home buyer tax credit wiped out the gain. In 2011, however, Wood expects a 12 percent increase in Salt Lake annual home sales — the first gain in six years. Yun also said he believes the number of home sales sold in Utah will be higher in 2011.

 “The job market is improving, pent-up demand is growing, foreclosures have crested and the decline in home prices has narrowed — all signs that the worst is over,” said Wood’s report. “For the most part, declines have run their course, markets have stabilized — albeit at very low levels — and conditions for a recovery are in place.”

The stabilization of home prices is great news for consumers who are looking to purchase homes in the next year. These buyers will benefit from a more stable housing market while still enjoying low prices and interest rates. To learn more about home buying in your neighborhood, contact a local REALTOR®.

By Kenny Parcell
Appeared in the Salt Lake Tribune and Deseret News January 15, 2011