The fall is always a welcome time of year for property managers. The busy summer leasing season is winding down, cooler temperatures are mercifully in the forecast, and we are finally afforded time to accurately assess our successes and failures. In this month’s update, we will discuss how Utah is responding to a changing real estate market and some welcome news in the battle against inflation.
Headlines
August Jobs Report - Following July’s stunner of a jobs report where the labor market remained scorching hot, August’s report finally showed signs of cooling. The U.S. economy added 315,000 jobs, a far cry from last month’s revised figure of 526,000, while the unemployment rate ticked up to 3.7% from 3.5% in July. Why would we want a cooling job market? One word, inflation. The Fed has been aggressively increasing interest rates in an effort to cool an overheating economy, and while we’ve seen sectors like housing dip in response, the labor market has remained stubbornly strong. The Fed is tasked with a delicate balancing act between simultaneously fighting inflation by slowing economic activity, but not going too far and driving the economy into a painful recession. It won’t be easy, but some think a soft landing is possible.
Weekly Jobless Claims - Weekly jobless claims decreased for the week ending september 3rd to 222,000 from a revised 228,000 from the week before. No matter how much we hear about a possible recession, the labor market remains remarkably strong. However, for all intent and purpose the numbers were flat, and when contextualized with the August Jobs report and the fact that continuing claims jumped by 36,000 to 1.47 million (4 month high), we are starting to see signs of deceleration.
More Fed Rate Hikes This Month? - This is the question everyone is seeking an answer to. In fact, financial markets are so desperate for information, they can swing wildly based on a few fairly nondescript comments. The August Jobs report was welcome news (compared with July’s), but the next can’t miss report arrives next week on September 13th. That’s the day the Bureau of Labor Statistics will release data from August’s Consumer Price Index. Analysts will be looking for signs that inflation is easing (hopefully dropping like a rock) which might indicate that the Fed will put an end to future rate hikes. No matter what it says, many expect another 50 to 75 basis point hike when the Fed meets next on September 21st, but positive signs in the data should reduce the need for additional increases in 2022 and beyond.
Utah Real Estate Market
When discussing home prices, it’s important to remember that real estate is local and you can source legitimate data that can back up almost any narrative. For example, it’s easy to run into articles with eye-catching headlines like this or this. Both articles, while certainly accurate and well researched, have scary sounding headlines that lack proper context. The reality is almost any real estate market, no matter how normal it may be when viewed over the long term, will look weak next to the post-pandemic price explosion we’ve witnessed in the last 12 months or strong when compared with the crash following the subprime lending crisis. This is why it’s important to understand all sides of the issue and maintain proper perspective. Yes, Utah’s real estate market is cooling, but it looks far more normal from a historical perspective than it does problematic due to the underlying housing shortage.
Median Sold Price* August: $526,000 September: $537,500 November: $537,000 December: $559,000 January: $564,500 February: $577,000 March: $600,000 April: $613,000 May: $629,260 June: $620,000 July: $600,000 August: $590,000 Monthly Change: Down 1.7% | Sold Count* September: 2,107 November: 1,957 December: 1,995 January: 1,177 February: 1,277 March: 1,740 April: 1,847 May: 1,897 June: 1,871 July: 1,517 August: 1,720 Monthly Change: Up 13.4% Year Over Year: Down 22.0% | Average # of Active Listings* September: 2,544 November: 1,695 December: 1,012 January: 957 February: 914 March: 1,102 April: 2,139 May: 3,054 June: 4,722 July: 5,314 August: 5,539 Monthly Change: Up 4.2% Year Over Year: Up 141% |
* all graphs/data are for single-family homes in Salt Lake, Utah, and Davis Counties.
Industry Updates
Rent Growth Slowing - Much like home values, rent prices can’t (and shouldn’t) be expected to climb this rapidly forever. Nationally, rents have climbed 7.4% so far this year which is roughly half of the 14.8% we saw at this time last year. Rent growth has also decelerated year-over-year as we sit at 10% in August verses the 18% we saw at the beginning of the year. Overall, the rental market remains strong with rents continuing to climb in 79 of the 100 largest U.S. cities.
Will Investors Target Commercial to Residential Conversions? - There are two things we know to be true. The first is people like living in metropolitan areas and the second is land in such places is scarce. Enter the commercial to residential conversion as a possible solution in larger metros like New York City. It’s certainly not a perfect solution, and challenges do exist, but it’s an interesting concept nevertheless.
