2013 Year-end report
With an impressive performance in 2013, Salt Lake County’s multi-family investment property market has nearly made a full recovery after experiencing one of the worst recessions in our history. 2013 started strong with continued rapid price appreciation carrying over from 2012. Average sales prices in the duplex/4-plex sector soared during the 1st and 2nd quarter, increasing approximately 17-19%. As prices neared pre-recession levels around mid year, listing inventory increased and prices stabilized creating a sense of normalcy in the market.
Many new and experienced investors entered the investment property market in 2013 due to historically low interest rates, depressed prices, and the resulting high “cash on cash” returns. Many real estate investors expressed their frustration with the miniscule returns being offered for money market accounts and bank CDs as they rolled their funds out of those accounts and into real estate holdings. With the Federal Reserve keeping downward pressure on interest rates, the average citizen was nearly forced into either investing in real estate or the stock market in order to make a return higher than .5% to 1%.
During the first half of 2013 many of the investment property sellers were those who had been riding out the recession, anxious to cash out at a fair market price. Many had purchased investment property prior to the recession with unfavorable loans, no money down, negative cash flows, etc. Other sellers had simply been waiting to cash out or retire. As the year progressed into the 3rd and 4th quarter most of the sellers who were looking to simply cash out disappeared and were replaced by sellers wanting to participate in 1031 exchanges and leverage their funds into larger properties.
As we enter 2014 we expect the investment property market to remain solid and stable, with an increased number of sellers participating in 1031 exchanges and rolling their funds into larger properties. We also expect to see a continued supply of new and existing investors coming into the market as the interest rates remain relatively low and “cash on cash” returns relatively high. Utah’s economy had a solid year in 2013 with an increase of more than 40,000 jobs and an unemployment rate of 5%. Utah currently ranks fourth in the country for relative job growth and all indicators for 2014 suggest that Utah’s economy will remain solid throughout the year.