Welcome to January! As we bid farewell to the challenges and victories of the past year, we eagerly embrace the possibilities that lie ahead in 2024. Our optimism centers around the hope for easing inflation, a robust job market, and the anticipation of potential for interest rate cuts. In this month’s update, we will spotlight changes in the labor market, discuss the Federal Reserve's approach on interest rates and provide a comprehensive overview of the upcoming legislative session.
Headlines
December Jobs Report - In December, the U.S. job market performed better than expected, with employers adding 216,000 jobs, keeping the unemployment rate steady at 3.7%. This exceeded estimates of 170,000 jobs and a 3.8% unemployment rate. The increase was driven by gains in government jobs, healthcare-related fields, and leisure and hospitality. Average hourly earnings rose 0.4% on the month and were up 4.1% from a year ago, surpassing estimates. Despite this positive report, a broader measure of unemployment, including discouraged workers and part-time employees, rose slightly to 7.1%. The labor force participation rate decreased to 62.5%, the lowest since February. Inflationary pressures persisted, with average hourly earnings increasing. The strong job market continues to challenge expectations of a slowdown, and the Federal Reserve's plans for interest rate cuts may face resistance.
Weekly Jobless Claims - In the week ending January 6th, first-time claims for U.S. unemployment benefits unexpectedly decreased, slipping to 202,000, a decline of 1,000 from the revised level of 203,000 in the previous week. Economists had anticipated an increase to 210,000. This marks the lowest level since the week ended October 14th. The four-week moving average was 207,750, a decrease of 250 from the previous week. Continuing claims came in at 1.83 million, which was a decline of 34,000 from the prior week and below the consensus call of 1.89 million. Locally, Utah claims jumped substantially to 1,259 from the prior week's mark of 942.
Consumer Price Index - In last month’s release of the Consumer Price Index (CPI), which was missed in our previous publication, the CPI rose by 0.1%, reflecting a 3.1% increase from a year earlier, slightly exceeding expectations. This modest uptick suggests a gradual slowdown in inflation compared to the 3.2% rate observed the previous month. The latest CPI report released on January 11 shows that inflation remains stubbornly sticky. Consumer prices in the U.S. exceeded expectations in December, registering a 0.3% monthly increase and a 3.4% year-over-year rise, surpassing estimates of 0.2% and 3.2%, respectively. The core CPI, excluding volatile food and energy prices, mirrored this trend, rising by 0.3% for the month and 3.9% annually, slightly exceeding estimates. A notable contributor to this increase was the 0.5% rise in shelter costs for the month, accounting for over half of the core CPI surge. Wages, adjusted for inflation, showed a 0.2% gain on the month and a modest 0.8% increase from a year ago. While the Federal Reserve acknowledges inflationary pressures, it maintains a cautious stance on interest rate cuts. Markets, however, are anticipating a potential cut in March.
Fed Meeting - The Federal Reserve's next meeting isn't scheduled until January 30-31, delaying the latest insights into their strategy. To catch up on what happened during the December 12-13 meeting, the Federal Reserve maintained interest rates unchanged for the third time, hinting at a potential shift towards rate cuts in the near term. Despite raising rates 11 times since March 2022 to counter high inflation, the Fed foresees a slower pace of inflation in the coming year. There's anticipation on Wall Street for a potential rate cut in March, although Fed Chair Jerome Powell indicated discussions about future rate hikes. The Fed's latest projections suggest a likelihood of three quarter-point rate reductions in 2024, signaling optimism for the housing market. Powell highlighted that rate cuts might be considered before inflation hits 2%, with a careful eye on inflation-adjusted interest rates before any decision. The Fed's quest for a "soft landing," where inflation stabilizes without causing notable unemployment, remains uncertain, particularly with economic challenges like declining retail sales and rising credit card balances.
A Comprehensive Overview of Utah Legislative Session 2024
As the curtain rises on the 2024 Utah Legislative Session, a myriad of issues takes center stage, each commanding attention and discussion among policymakers. This comprehensive overview sheds light on the key facets of this legislative endeavor, covering topics ranging from tax assessments and eviction expungement to rent increase notices and property management regulations.
Tax Assessors Prohibitions: Navigating Property Tax Challenges
A significant point of contention revolves around property tax assessments, particularly in the context of homes designated as "primary residences" in Utah. The current system offers a 40% discount on property taxes for such residences, fostering a stark contrast between primary homes and second residences or vacation rentals. The incentive for tax assessors to identify the latter category, which yields higher tax revenue, has sparked debate.
Tax assessors often scrutinize the address to which property tax notices are mailed. Properties receiving notices elsewhere are sometimes assumed to be ineligible for the 40% exemption. However, the crux of the issue lies in the fact that over 125,000 single-family homes, serving as primary residences for renters, enjoy this tax benefit. Some assessors, perhaps overzealous, demand extensive documentation from property owners to prove eligibility, including leases of a specific duration, renters' personal records, and utility bills.
In response to these challenges, efforts are underway during this legislative session to curtail assessors' authority to demand anything beyond a simple statement from property owners affirming the property's use as a primary residence. The aim is to relieve property owners from undue burdens and ensure a fair and transparent process. As developments unfold, updates will be provided to keep stakeholders informed.
Eviction Expungement: Shaping Tenant-Landlord Dynamics
In a pioneering move, the Rental Housing Association (RHA) proudly highlights its collaboration with renters' advocates to craft an eviction expungement bill. Presently, tenants can expunge eviction records by settling outstanding balances. This groundbreaking legislation encourages a mutually beneficial resolution, allowing renters to clear their records by promptly addressing financial obligations.
Building on this success, there are plans to introduce a bill that extends the expungement provision to include dismissed evictions within a 90-day window. The overarching goal is to incentivize renters to swiftly resolve issues, fostering a cooperative relationship between landlords and tenants. Updates on this initiative will be shared as the legislative process unfolds.
Notice of Rent Increase: Striking a Balance in a Competitive Housing Market
The dynamics of the rental market often necessitate a delicate balance between landlords and tenants. Recognizing the challenges tenants face in a competitive housing market, discussions are underway to align with states that require a 60-day notice for rent increases. This proposed change seeks to provide tenants with more time to explore alternative housing options, particularly if they find the proposed rent increase untenable.
Importantly, this proposed adjustment would not apply to month-to-month tenancies or alter the notice required to terminate a lease term. Striking this balance aims to address the needs of both landlords and tenants, fostering a fair and considerate rental environment.
Property Management Licensing and Division of Real Estate: Navigating Regulatory Complexities
A critical aspect of the legislative agenda involves property management licensing and the regulation of property managers by the Division of Real Estate. Currently, managing real estate for others necessitates a real estate license, which includes a substantial training component. However, concerns have been raised about the disproportionate emphasis on property management within this training.
To address this issue, the Office of Professional Licensing is poised to issue recommendations advocating for changes to reduce barriers to entry for property management. Simultaneously, discussions are underway regarding the Division of Real Estate's regulatory role over property managers. Over the past 12 years, navigating these regulatory complexities has proven challenging.
As the legislative process unfolds, there may be a need for statutory changes to strike a balance between renter protections and easing regulatory burdens on property managers. Acknowledging the complexities and emotions surrounding this issue, detailed discussions and education initiatives will accompany any proposed legislative changes. Engaging stakeholders from all perspectives remains a priority to ensure a comprehensive and informed decision-making process.
In conclusion, the 2024 Utah Legislative Session unfolds as a dynamic arena where diverse issues converge, demanding careful consideration, collaboration, and informed decision-making. As the session progresses, stakeholders can anticipate updates, engaging discussions, and, most importantly, an evolving legislative landscape that seeks to address the evolving needs of Utah's rental housing sector.
Utah Real Estate Market
December showed new things happening in Utah's housing market, with some interesting changes. The median sold price observed a slight decrease of 2.29% in December, settling at $549,850. However, comparing year-over-year statistics, there was only a marginal decline of 0.03%. Regarding the sold count, December saw a positive uptick of 1.71% from the previous month, with a total of 1,052 properties sold. However, in the year-over-year comparison, there was a notable decrease of 9.54%. The average number of listings experienced a decline of 8.98% compared to November, with December recording 4,377 listings. Similarly, in the year-over-year comparison, there was a notable decrease of 13.05%.These metrics suggest a stable but slow real estate market as we enter the new year.
Median Sold Price* | Sold Count* | Average # of Listings* |
December: $550,000 January: $536,500 February: $550,000 March: $555,628 April: $567,750 May: $585,000 June: $590,000 July: $590,000 August: $586,000 September: $590,850 October: $575,000 November: $ 562,750 December: $549,850 | December: 1,163 January: 835 February: 1,113 March: 1,454 April: 1,308 May: 1,518 July: 1,372 August: 1,451 September: 1,130 October: 1,192 November: 1,034 December: 1,052 | December: 5,034 January: 4,143 February: 3,662 March: 3,333 April: 3,350 May: 3,480 July: 5,522 August: 4,801 September: 5,121 October: 5,166 November: 4,809 December: 4,377 |
Monthly Change: Down 2.29% | Monthly Change: Up 1.71% Year Over Year: Down 9.54% | Monthly Change: Down 8.98% Year Over Year: Down 13.05% |
* all graphs/data are for single-family homes in Salt Lake, Utah, and Davis Counties.
Rent Report
The latest rent growth statistics reveal notable trends in various key cities across Utah. In Draper, there was a marginal increase of 0.3% in monthly rent growth, although year-over-year rates indicated a slight decline of 0.6%. Conversely, Murray experienced a significant month-over-month decline in rents by 1.6%, coupled with a substantial year-over-year drop of 4.3%. Orem displayed a minor 0.1% decrease in monthly rents but maintained a positive year-over-year growth rate of 2.1%. Salt Lake City observed a 0.6% reduction in rents compared to the prior month, with a moderate year-over-year decrease of 2.3%. Sandy encountered a noticeable decline in monthly rents by 1.4% and sustained a 2.4% drop in year-over-year rates. South Jordan showcased a modest 0.5% decrease in monthly rents and experienced a 1.0% decline year over year. Lastly, West Jordan faced a significant month-over-month decline of 1.3% in rents and sustained a substantial 5.0% drop in year-over-year rates. This data illustrates the differences in demand for Utah's rental submarkets, but the overall trend is weak compared to years past.
Utah | Month Over Month | Year Over Year |
Draper Murray Orem Salt Lake City Sandy South Jordan West Jordan | 0.3% -1.6% -0.1% -0.6% -1.4% -0.5% -1.3% | -0.6% -4.3% 2.1% -2.3% -2.4% -1.0% -5.0% |
*Rental data provided by apartment list.
Industry Updates
Rent Control Implications for Housing Industry - Industry leaders recently met with Sandra Thompson, the Director of the Federal Housing Finance Agency (FHFA), to discuss potential rent control measures for multifamily properties supported by Fannie Mae and Freddie Mac. The FHFA, aligning with the White House's Renters Bill of Rights, aims to curb extreme rent increases in future investments. However, housing providers expressed concerns during the meeting, emphasizing the adverse effects of rent control on developers and the quality of rental housing. Cindy Clare, a National Apartment Association (NAA) Board Member, highlighted challenges faced by developers in regions with local rent control policies, hindering acquisition prospects and posing operational difficulties for maintaining high-quality rental housing. Additionally, Bonnie Smetzer, another NAA Board Member, emphasized the positive impact of Florida's Live Local Act, a substantial housing investment initiative aiming to prevent detrimental rent control policies at the local level. The NAA remains actively involved in federal advocacy efforts, engaging in discussions on various rental housing aspects, including eviction regulations, rent increase notifications, renters' rights, and the impact of rent control. Their commitment extends to influencing federal policy outcomes, continuing engagement with the Biden Administration until final decisions are reached.
HUD Announces Proposed “30-Day Notice” Rule for Nonpayment of Rent - HUD is set to introduce a "30-Day Notice" rule in a Notice of Proposed Rulemaking, aiming to give residents in public housing or properties with project-based rental assistance a chance to address nonpayment of rent before eviction. The rule mandates public housing agencies and property owners participating in HUD Multifamily programs to provide tenants written notification 30 days before initiating eviction proceedings due to rent nonpayment. This notice includes instructions for rectifying nonpayment lease violations and information on income recertification and rent hardship exemptions. The proposed rule aims to prevent evictions, benefiting both landlords and tenants by averting costly vacancies. It's estimated to impact 3.9 million individuals in 2.2 million households, offering an opportunity for feedback for 60 days after its publication in the Federal Register on December 1. This initiative aligns with HUD's commitment to renters' rights outlined in the Biden-Harris Administration's Blueprint and follows previous efforts to enhance fairness and renter protections in housing.
