Market Report

Summer finally arrived in Park City the end of June after a record-breaking snowy winter and spring. As we reflect on the second quarter, it is encouraging to note that the Park City real estate market has remained stable with a number of indicators showing a positive upward trend.

Second Quarter 2011 Market Overview

Although the national economy seems to have stalled, and in some areas and sectors has even back tracked, the Utah economy appears to remain on a steady course of recovery. From 2000, through the first quarter of 2011, the Utah GDP has grown at the 6th fastest pace in the country. According to the Bureau of Economic Analysis, the GDP of Utah grew 29.1 percent over the past 11 years making it the 33rd largest economy in the United States. It is worth noting that of the five states that grew faster than Utah, only Oregon has a larger population.

Are we at or near the bottom of the national housing decline? That is hard to say as data is somewhat mixed across the country. The recently released Standard & Poor’s Case-Shiller Home Price Index was below its level of two years ago making it a new “post-bubble” low and putting it 33.1 percent under its July 2006 high point. The national housing index, which is released quarterly, fell 4.2 percent in the first quarter of 2011 after a decline of 3.6 percent in the fourth quarter of 2010. This is also a new post bubble low. This data would indicate that we must be near or at the bottom of the market and many housing experts believe that is where we are. These experts do not expect a rapid recovery suggesting we may fluctuate over the next few years before we have a significant housing improvement.

Forclosure Outlook

Foreclosures and short sales in Summit County appear to be following the national trend, where distressed properties are on the decline. In the first quarter of 2011, 33.4 percent of all units sold in Summit County were either bank owned or short sale properties. In the second quarter that number dropped to 27.9 percent. Of the 451 units sold in the second quarter 126 were either bank owned or short sales. Summit County is much better than the four Wasatch Front counties where 40 percent of sales were bank owned or short sales. Utah ranks fourth nationally in the number of foreclosures behind Nevada, Arizona and California.

The decline in the number of foreclosure filings nationally, is suggested by many to be a bit misleading. Ordinarily this decline would suggest that homeowners are rebounding and making their mortgage payments on time, or catching up on delinquent payments. The drop in foreclosure filings, however, is generally believed to be occurring due to an increase in processing delays that are happening across the country. Lenders are now taking longer to file foreclosures against homeowners who have fallen behind in their payments. Realty Trac reports that in the second quarter of 2011 the average foreclosure process was 318 days. This is 41 days longer than during the same quarter last year. As these processing delays have grown a backlog of foreclosures has developed. This scenario will most likely create an increase in the number of foreclosures in late 2011 and into 2012 as lenders are forced to delay foreclosures into the future. It could also prolong the housing recovery.

The Park City Real Estate Market

The Park City real estate market continues to move along at a steady pace. Through the first half of 2011 the market has remained relatively consistent, with most major market indicators moving very slightly one direction or another. The current median sales price ending the 2nd quarter of 2011 at $525,000 – barely fluctuated over the past six months, and is now at the same price as in December of 2010. The median home price however, is now at its highest since July of 2009.

The quantity sold compared to the total dollar volume sold is a telling comparison. Since June of 2010 the year over year total number of units sold has experienced an increase of approximately 15 percent. The 12 month rolling total units sold in June 2011 was 1,590 units. The last time the market sold this many units in a 12 month period was October of 2008. Activity has picked up steadily since the low point of September 2009.

Over the past 12 month rolling period the total dollar volume of properties sold decreased by five percent. Although the total dollar volume sold has fluctuated during the past year the total year over year dollar volume percentage has been decreasing. If you now compare units sold versus dollar volume sold it will indicate one of two things; lower value properties are selling at a greater pace than more expensive properties, or the overall pricing of homes is declining. The reality is probably a combination of both.

The total number of active listed units at the end of the second quarter was 2,724. Since the first of the year this number has been ticking upward. This is normal in a resort market as inventory usually grows in the first half of the year and peaks in June. The last time inventory in June was at a level this low was in 2007. The average number of days properties have been on the market has been very consistent over the past two years ranging from 165 to 180 days. Expect this trend to continue through the next several quarters.

One significant number that has been moving in a positive direction for the past 12 months is the sales price to list price ratio. In June of 2010 properties were selling for an average of 92.67 percent of their listing price. Over the past year that ratio has climbed at a steady pace to a current impressive ratio of 97.12 percent. There are two factors influencing this – first, there is growing demand for housing, and second, sellers are better understanding the market and are listing their properties at more competitive prices. This again shows how important it is to be have a listing priced close to market value.

The number of listed properties versus the number of sold properties is also a very important comparison in gauging the strength of a market. At the end of the second quarter 2011 the 12 month total listed properties versus sold properties was at 39.21 percent. This is the highest this number has been in the Park City market since December of 2007. Although the current number of listings is only approximately 70 percent of the number in 2007, the fact that almost 40 percent of those properties are selling is very significant. Combine that with the fact that our absorption rate, at 20.59 months, is down to the same level that it was in May of 2008 and you will see an overall improving real estate market.

In general the major market indicators are pointing to a cautiously optimistic market. Several of these indicators in the second quarter of 2011 are moving in a positive direction and are showing that the Park City real estate market has reached its low point and is rebounding at a consistent and sound rate.

First Quarter 2011 Market overview

Economic factors, both nationally and locally, remain the driving force in the movement of the housing market. The national economy seems to be moving in a positive direction; the unemployment rate has experienced a drop over the last two months and larger organizations are starting to hire again. Private and public investment is on the rise. Corporate spending on equipment and software was up 15.1 percent in 2010, the largest increase since 1978. Moody’s Analytics is projecting GDP growth of 3.9 percent in 2011 which follows a 2.9 percent increase in 2010. All of this has yet to translate into a significant increase in the real estate market, but should have an impact in the latter part of the year.

Nationally, the upper-end residential real estate market is beginning to rebound at a much quicker pace than the entry-level and mid-level markets. According to the National Association of Realtors sales of homes priced above $1 million were up 3.9 percent in February from a year ago. At the same time homes priced between $100,000 and $250,000 had slipped by seven percent. Although million dollar homes account for only 2 percent of sales nationally and homes between $100,000 and $250,000 account for 42 percent of sales, those numbers are significantly reversed in the Park City market. The up-tick in high-end property sales is a good sign for the local market.

Utah’s economy continues to outpace the majority of the country. The Utah Revenue Assumption Committee recently released an updated projection for the 2011 major economic indicators. Of the 11 indicators six were revised higher, four remained level and only one, net in-migration, was revised lower. The most impressive increase comes from the tax revenue indicator. From fiscal year 2010 to fiscal year 2011 sales and use tax in Utah increase 12.1 percent to $104.4 million. Corporate tax jumped 35 percent, and most significantly, the individual income tax increased by 9.8 percent to $115 million.

The Park City Real Estate Market

Park City has enjoyed an increase in tax revenue as well. According to City Hall’s Budget Department, in the second half of 2010 the city collected 14.2 percent more sales tax than during the same period of 2010. The city is now expecting more than $1 million in additional tax revenue going to the General Fund. The Budget Department is now projecting a sales tax revenue increase of 21 percent for the entire fiscal year over what was originally forecast. Additionally property tax revenue is expected to be up four percent from earlier estimates.

The Commercial Real Estate market in Park City is beginning to experience a rebound from the downturn in 2007. The Historic Main Street Retail sector has stabilized, new businesses have moved in and lease rates are starting to move upwards. Lease Rates on Main Street have been secured in the $32- $40 per square foot range. Vacancy rates for the retail market in Summit County are averaging 9.32 percent. The office market, however, continues to struggle. Many small businesses, who were leasing office space during the good times, have either closed their doors or have moved to home offices to save on overhead expenses. Lease rates in the office sector are at their lowest point since prior to the Olympics in 2002. Office vacancy rates are averaging 18.78percent. Commercial leasing activity at Kimball Junction remains relatively flat; however, there is talk of new ownership of New Park and turning the available vacant retail space in to an upscale outlet mall.

The Park City construction industry appears to have turned the corner with a better than expected first quarter. During the first quarter of 2011 the Building Department had received approximately $5.1 million in permits, $1 million more than during the same period last year; this represents a 25 percent increase. March was the best month of the year with the department receiving 55 permits totaling $2.8 million. It is too early to say that this is a significant trend, but it is certainly good news following two years of retreat in the construction industry.

Park City Stats

The total number of active listed units in the Park City area has remained relatively flat since the end of 2010 hovering around 2500 units. At the end of March there were 2508 units listed. Meanwhile, pended listings have increased notably in the first three months of 2011 moving from 185 in December of 2010 to 255 in March 2011. The 12-month rolling percentage of units sold versus the number of units listed has been on a steady rise since it hit bottom in April of 2009. In March, the 12-month number units sold versus units listed reached 36.32 percent, the highest percentage since February of 2008.

The 12-month rolling total number of units sold continues to move upward,although at a slower pace than at the end of 2010. The number of units sold over the past 12 months was 1477 – 15 percent higher than the same period in 2010. Even though we have seen an increase in the total number of units sold the total dollar volume of these units is declining. The total dollar volume of sold units is down 6 percent from the same time last year indicating that less expensive properties are selling more frequently than higher priced properties.

The absorption rate continues to drop following the trend of the past 20 months. Currently there is a 20.38 month supply of properties on the market. This is half the absorption rate that we experienced in August of 2009 when the housing supply reached 41 months. The last time the absorption rate was at this low a level was in May of 2008. With the number of active listings in decline, and the number of total units sold trending upward, the absorption rate is expected to continue to shrink during the next several months.

The listed price versus sales price of properties is maintaining its upward swing.The first quarter ended with a list to sale prices ratio of 95.79 percent, compared to 94.92 percent at the end of the fourth quarter of 2010. Sellers are becoming more realistic in how they are pricing their properties. At the same time buyers are beginning to realize that the market has reached bottom and has begun to rebound. The number of days a property remains on the market is declining with the average home on the market for 166 days at the end of March.

Short sales and foreclosures remain a significant influence on the market.These two classifications account for nearly one third of all transactions. The trend is moving in a positive direction as fewer and fewer homes fall into these categories. As short sales and foreclosures become less frequent we will begin to see a rise in the median sales price of homes, which has been fairly stable over the past several months. The median home price of homes sold in the 12 months ending in March was $515,000.