Last year was a good year for industries that depend on the building and selling of houses in the
But with sales flattening in the first four months of 2014, Valley housing experts wonder what will happen next. Will the market resume growth or begin to decline?
Business remains strong for
The slowdown doesn't bother him. Hanson says he expected it. Prices are close to their true values, not post-recession bargains or bubble-inflated peaks, he says.
"I didn't like to see the run-up that we had," he says. "I knew [a slower period] was coming. We had a return to normal values."
But at least one market watcher says trouble lurks.
"Right now, there's a realization on the part of many agents that there are storm clouds looming," Webb says.
Valley homebuilders have been in comeback mode for the past three years.
The leading Valley homebuilder by volume,
In March, owner
Homebuyers are snapping up affordable used homes, which in May sold for 18 percent less per square foot than new ones in
But where the Valley has a shortage of resale homes at that price range, it's awash in newly built homes, according to Intermountain Multiple Listing Service data.
"Those builders should really look at these numbers carefully and realize they are heading into dangerous waters," he says.
Barton disagrees. "We are not seeing it on the new construction side," he says in an email. "Based on our reporting we are showing a 2.5 months' supply in
Brighton's Hansen, however, says there is an oversupply that could stymie construction.
"The oversupply could last through the end of the year, but builders in that price point are prepared for that," Hansen says. "They have to be. These are smart people."
He says new homes in the
"What do young families do?" Hansen says. "There could be positives, like revitalizations of older neighborhoods, areas closer to towns and services. There could be a market to invest in homes with the mindset of preparing them for newer homebuyers in older communities."
HESITANCY OVER RISING RATES
Rising interest rates contribute to the hazy outlook. During the height of the housing crisis, the Federal Reserve propped up the market by creating money that flooded lending industries. Interest rates for 30-year mortgages fell from 6 percent in 2008 to a record-low 3.35 percent in 2012, so homebuyers could get more square footage without paying more.
But rates rose by about a point, to 4.34 percent, in April as the Fed began to curb its money creation.
A home sold in
Webb says home sales will be suppressed if interest rates inch higher. "I see the effect as like pouring cold water on the fire," he says.
"If the rate jumps a percentage point it spooks people, because it modifies their ability to buy the size of house they want," Thompson says (see "The Shifting Rate," page 25). "But in the short term, some think, 'I better get on the bandwagon now, because the interest rates are rising.' It can have that positive effect."
The interest rate could rise further if
A PENDING DECLINE?
The number of homes sold in
But the growth isn't sustainable, because fewer homes are in the closing process now than a year ago, Webb says. Year-over-year pending sales are down 8 percent to 15 percent in each month in 2014.
"Unless there's a tremendous reversal in the coming months, we'll hit something more like 2012 numbers where sales drop into the 7,000s" for
Over the long term, however, sales will eventually increase to match the rising population, says
The 11,639 homes sold in
"There's a good case to be made that the population base can support an increase in home sales," Bundgard says. "There's a lot of buyers out there sitting on the sidelines."
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