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Salt Lake

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August 2022

A David Weekley Homes Sales Consultant with Real Estate Agent Mindy Fung and Vickie & Charles Taylor

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Turning Houses into Homes®

Table of Contents Features

ink drop ©/Adobe Stock

10 Realtor® Day at the Parade of Homes 12 Yun: Possible Economic Downturn Likely to Be Mild Catherine Mesick

Yun: Possible Economic Downturn Likely to Be Mild

14 Talking Points to Calm Consumers’ Housing Bubble Fears Melissa Dittmann Tracey 18 Selling a Second Home—at Least a Part of It Melissa Dittmann Tracey 22 Real Estate Forecast: Market to Ease Catherine Mesick 26 Could Solving the Housing Shortage Help Close the Racial Gap, Too? Melissa Dittmann Tracey

Korisbo ©/Adobe Stock

30 Please Stop Saying the Real Estate Market is ‘Crazy’ Jared James

Selling a Second Home—at Least a Part of It

Columns 7 The Sky Isn’t Falling Steve Perry – President’s Message

Departments 8

Happenings

In the News

28 Housing Watch

On the Cover: Cover Photo: eskay lim ©/Adobe Stock

Smole ©/Adobe Stock

This Magazine is Self-Supporting

Could Solving the Housing Shortage Help Close the Racial Gap, Too?

Salt Lake Realtor® Magazine is self-supporting. The advertisers in this magazine pay for all production and distribution costs. Help support this magazine by advertising. For advertising rates, please contact Mills Publishing at 801.467.9419. The paper used in Salt Lake Realtor® Magazine comes from trees in managed timberlands. These trees are planted and grown specifically to make paper and do not come from parks or wilderness areas. In addition, a portion of this magazine is printed from recycled paper.

Salt Lake

REALTOR slrealtors.com

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August 2022 volume 82 number 8

slrealtors.com 4 | Salt Lake Realtor ® | August 2022

The Salt Lake REALTOR® (ISSN 2153 2141) is published monthly by Mills Publishing, located at 772 E. 3300 South, Suite 200 Salt Lake City, Utah 84106. Periodicals Postage Paid at Salt Lake City, UT. POSTMASTER: Send address changes to: The Salt Lake REALTOR,® 772 E. 3300 South, Suite 200 Salt Lake City, Utah 84106-4618.

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1. PowerBid Approval (the “Approval”) is contingent upon receipt of executed sales contract, an acceptable appraisal supporting value, valid hazard insurance policy, and a re-review of your financial condition. Guaranteed Rate, Inc. reserves the right to revoke this Approval at any time if there is a change in your financial condition or credit history which would impair your ability to repay this obligation and/or if any information contained your application is untrue, incomplete or inaccurate. Receipt of an application does not represent an approval for financing or interest rate guarantee. Not all applicants will be approved for financing. Restrictions may apply, contact Guaranteed Rate for current rates and for more information. 2. The Guaranteed Rate FastTrack is available from 5/1/22 through 11:59 PM, 8/31/22 provides that eligible borrowers will receive a “Clear to Close Loan Commitment” (“CTC”) within twenty-four business hours from Guaranteed Rate’s receipt of all necessary borrower documentation. Guaranteed Rate, Inc. reserves the right to revoke this “CTC” at any time if there is a change in your financial condition or credit history which would impair your ability to repay this obligation. CTC is subject to certain underwriting conditions, including clear title and no loss of appraisal waiver, amongst others. Read and understand your Loan Commitment before waiving any mortgage contingencies. Borrower documentation and Intent to Proceed must be signed within twenty-four business hours of receipt. Not eligible for all loan types or residence types. Fixed rate conventional loans on single family residences only with at least 20% down payment. Eligible for primary and second homes. Property must be eligible for an Appraisal Waiver and borrower must opt in to AccountChek for automated income and asset verification. Self-employed borrowers and Co-borrowers are not eligible. Not all borrowers will be approved. Borrower’s interest rate will depend upon the specific characteristics of borrower’s loan transaction, credit profile and other criteria. Offer not available from any d/b/a or operations that do not operate under the Guaranteed Rate name. $250 Closing Cost Credit applied at closing, no cash value. Not available in New York, West Virginia, Kentucky, or Texas. Restrictions apply. Contact Guaranteed Rate for more information. 3. According to Scotsman Top Loan Originators, 2022. Conditions may apply. Guaranteed Rate is an Equal Opportunity Employer that welcomes and encourages all applicants to apply regardless of age, race, sex, religion, color, national origin, disability, veteran status, sexual orientation, gender identity and/or expression, marital or parental status, ancestry, citizenship status, pregnancy or other reason prohibited by law.( Guaranteed Rate, Inc.; NMLS #2611; For licensing information visit nmlsconsumeraccess.org. Equal Housing Lender. Conditions may apply • AR: 3940 N Ravenswood, Chicago, IL 60613, (866)-934-7283 • AZ: 14811 N. Kierland Blvd., Ste. 100, Scottsdale, AZ, 85254, Mortgage Banker License #0907078 • CA: Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act • CO: Regulated by the Division of Real Estate, (866)-934-7283 • GA: Residential Mortgage Licensee #20973 • MA: Mortgage Lender & Mortgage Broker License #MC2611 • ME: Supervised Lender License #SLM11302 • MS: 3940 N. Ravenswood Ave., Chicago, IL 60613 • NH: Licensed by the New Hampshire Banking Department, Lic #13931-MB • NJ: 3940 N Ravenswood, Chicago, IL 60613, (866)-934-7283, Licensed by the N.J. Department of Banking and Insurance • NY: Licensed Mortgage Banker - NYS Department of Financial Services • OH: MB 804160, 3940 N. Ravenswood Ave., Chicago, IL 60613 • OR: 3940 N. Ravenswood Ave., Chicago, IL 60613 • RI: Rhode Island Licensed Lender • TX: 3940 N Ravenswood, Chicago, IL 60613, (866)-934-7283 • WA: Consumer Loan Company License CL-2611. Guaranteed Rate, Inc.; NMLS #2611; For licensing information, visit nmlsconsumeraccess.org. Conditions may apply. Guaranteed Rate is an Equal Opportunity Employer that welcomes and encourages all applicants to apply regardless of age, race, sex, religion, color, national origin, disability, veteran status, sexual orientation, gender identity and/or expression, marital or parental status, ancestry, citizenship status, pregnancy or other reason prohibited by law. (20220519-1173589)

Salt Lake

REALTOR

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President Steve Perry Presidio Real Estate

The Sky Isn’t Falling

Morelza Boratzuk RealtyPath Hannah Cutler Coldwell Banker

First Vice President Rob Ockey Century 21 Everest

Laura Fidler Summit Sotheby’s

Second Vice President Dawn Stevens Presidio Real Estate

Amy Gibbons Keller Williams Jennifer Gilchrist Utah Key Real Estate

Treasurer Claire Larson Woodside Homes

Tony Ketterling Equity Real Estate

Past President Matt Ulrich Ulrich Realtors®

John Lucky Berkshire Hathaway Jodie Osofsky Signature Real Estate Utah

CEO Curtis Bullock

Janice Smith Coldwell Banker

Directors

Carlye Webb Summit Sotheby’s

Jenni Barber Berkshire Hathaway

Advertising information may be obtained by calling (801) 467-9419 or by visiting www.millspub.com

Managing Editor Dave Anderton Publisher Mills Publishing, Inc. www.millspub.com President Dan Miller Art Director Jackie Medina Graphic Design Ken Magleby Patrick Witmer

Sales Staff Paula Bell Paul Nicholas

Office Administrator Cynthia Bell Snow Salt Lake Board: (801) 542-8840 e-mail: dave@saltlakeboard.com Web Site: www.slrealtors.com The Salt Lake Board of REALTORS® is pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the nation. We encourage and support the affirmative advertising and marketing program in which there are no barriers to obtaining housing because of race, color, religion, sex, handicap, familial status, or national origin. The Salt Lake REALTOR® is the monthly magazine of the Salt Lake Board of REALTORS®. Opinions expressed by writers and persons quoted in articles are their own and do not necessarily reflect positions of the Salt Lake Board of REALTORS®.

If you listen to the news regularly, you’ve seen the gloomy headlines: inflation, war, famine, tumbling stock prices, rising interest rates, recession, and falling home sales. Just remember – the media loves bad news, but you don’t have to. A study published by the Los Angeles Times found that people pay more attention to negative news than to positive news. With all the doom and gloom, let’s not forget the positive parts of the economy. Here in Utah, the unemployment rate is just 2%, while the U.S. rate is 3.6%. Anyone who wants a job can find a job. “Inflation is the most pressing economic issue before the economy,” said Mark Knold, chief economist at the Department of Workforce Services. “At such high levels, there is always concern that high inflation will find a way to weaken the economy. So far though there is no evidence that such is happening in Utah. Job growth remains strong, and the unemployment rate is very low and little moved across the past six months.” For Realtors®, fewer home sales can be a challenge, but this development may be fleeting. Utah is one of the top states in the nation for population increase. Our economy is strong, and people from across the country want to live here. We have a diversified economy. Homes are still selling within a few weeks. New residential construction is booming and is at the highest level in the state’s history. Foreclosure activity is running below historic averages. If you were a Realtor® in the years following the Great Recession, you will remember the flood of short sales and foreclosures. Homes often took six months or even a year to sell. During that period, 40% of Salt Lake Realtors® left the business. University of Utah Economist James Wood and Chief Economist Lawrence Yun (National Association of Realtors®), both point to a mild economic downturn, not a crash. The media may try to convince you that the sky is falling. In reality, this downturn is just a normal market adjustment.

Steve Perry President

Permission will be granted in most cases, upon written request, to reprint or reproduce articles and photographs in this issue, provided proper credit is given to The Salt Lake REALTOR®, as well as to any writers and photographers whose names appear with the articles and photographs. While unsolicited original manuscripts and photographs related to the real estate profession are welcome, no payment is made for their use in the publication. Views and opinions expressed in the editorial and advertising content of the The Salt Lake REALTOR® are not necessarily endorsed by the Salt Lake Board of REALTORS®. However, advertisers do make publication of this magazine possible, so consideration of products and services listed is greatly appreciated.

OFFICIAL PUBLICATION OF THE SALT LAKE BOARD OF REALTORS ® REALTOR® is a registered mark which identifies a professional in real estate who subscribes to a strict Code of Ethics as a member of the NATIONAL ASSOCIATION OF REALTORS®. October 2005

August 2022 | Salt Lake Realtor ® | 7

Happenings

In the News Economist Says No Decline in Home Prices Lawrence Yun, chief economist for the National Association of Realtors®, in July told the U.S. Senate Committee on Banking, Housing, and Urban Affairs that he does not foresee a nationwide decline in home prices despite indications that price growth is set to slow. Yun testified that the potential for weaker sales should increase available inventory in some markets, but not enough to diminish persistent affordability constraints which, for many Americans, have kept homeownership out of reach over recent years. “Any shortterm price adjustments, if they occur, will be less consequential compared to the immense longer-term housing affordability challenges we face as a country,” Yun said.

NAR Releases Profile of a Typical Realtor® The typical Realtor® had eight years of experience, according to a new survey of the National Association of Realtors®. The survey reported that 21% of NAR membership held broker licenses, and most Realtors® worked 35 hours per week. The median gross income of Realtors® was $54,300. Realtors® who had 16 years of more experience had a median gross income of $85,000, up from $75,000 in 2020. The typical Realtor® was a 56-year-old white female who attended college and was a homeowner.

Salt Lake Realtor® Competes as Professional Triathlete

June Home Sales

Salt Lake County, All Housing Types Photo credit: Jesse Peters/XTERRA

Source: UtahRealEstate.com

More Inventory, Falling Sales Lead to Normal Market

Home sales of all housing types fell to 1,347 transactions in June in Salt Lake County, the lowest number of sales for a June month in a decade and 26% lower than sales in June 2021. It was the 13th consecutive month of falling sales year over year. Under contract listings in June fell to 1,952, down 21% from June 2021. Meanwhile, new listings increased to 2,149 in Salt Lake County, up 9% compared to 1,968 new listings in June 2021. More listings are moving the housing market to a normal market, erasing the frenzy of multiple offers over the past two years. Total sales volume of homes sold in June in Salt Lake County fell to $852.6 million, down 12% from $967.7 million a year ago. 8 | Salt Lake Realtor ® | June 2022

Brian Summers, principal broker of Wasatch Life Realty, has been competing as a professional triathlete since December 2021. So far, he has competed in Maui, Hawaii; Whistler, British Columbia; Tahoe City, Calif.; Avon, Colo.; and Gaston, Oregon. In October, he will compete in the Xterra World Championship in Lake Molveno, Italy. The races vary in distance, but each are the equivalent of an Olympic distance triathlon. Each competition features open water swimming followed by a mountain bike and a trail run. Often, the swim courses feature a midswim beach run, meaning competitors must enter and exit the water multiple times. The bike and run portions include significant elevation gains. An Olympic distance triathlon is 1500 m swim (0.93 miles), 40 km bike (24.9 miles), and a 10 km run (6.2 miles).

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Realtor® Day at the Parade of Homes The Salt Lake Home Builders Association hosted Realtor® Day at the Parade of Homes on July 27 at the Realtor® Campus. Members enjoyed a free lunch and were able to buy discounted Parade tickets and tour Parade homes. Jaren Davis, executive officer of the Salt Lake Home Builders Association, said residential permits are being approved at record levels in Utah, helping to erase the state’s housing deficit. According to the Kem C. Gardner Policy Institute, the statewide cumulative housing shortage now stands at 31,000 units compared to about 56,000 in 2017.

10 | Salt Lake Realtor ® | August 2022

Photos: Dave Anderton

August 2022 | Salt Lake Realtor ® | 11

Yun: Possible Economic Downturn Likely to Be Mild A contracting economy typically means a recession, but other economic indicators are likely to mitigate the effects of the slowing economy. By Catherine Mesick

The country isn’t officially in a recession yet, despite two consecutive quarters of national contraction of the gross domestic product, a commonly cited indicator of an economic downturn, said Lawrence Yun, chief economist for the National Association of Realtors®. And several healthy economic trends, including a robust job market, coupled with new efforts to boost affordable housing could stave off a more serious slump. New guidance from the Treasury enabling state and local governments to use leftover emergency COVID-19 funding from the American Rescue Plan to create affordable housing should help ease the inventory 12 | Salt Lake Realtor ® | August 2022

crisis and counteract the effects of a tightening economy. Still, there are questions about whether the U.S. has entered “stagflation,” a period of high inflation combined with an economic slowdown, as many Americans feel the frustrating effects of a slower economy and higher consumer prices. But the National Bureau of Economic Research, the council that watches over U.S. business cycles, has yet to declare a recession, Yun noted. There are two major factors at work counteracting current economic conditions: Job creation is robust. Total payroll jobs were over 150

ink drop ©/Adobe Stock

million in early 2020 before the onset of the pandemic, Yun said at NAR’s Real Estate Forecast Summit in July. While COVID-19 shutdowns precipitated a steep decline in jobs, each month showed strong job creation after the restrictions were lifted. Though there is variation across the country, Yun said, the job market has largely recovered. “We are essentially at the same level of jobs and W-2 employment now compared to pre-COVID days,” he said. Data from the Bureau of Labor Statistics shows that right now, there are more job openings than unemployed people. As of June, there were 5.9 million workers searching for jobs and over 10 million job openings. So, while high unemployment typically characterizes a recession, “the ratio [today] is almost two to one,” Yun said. “It’s a very unusual recession—if we are in one.” Commercial real estate is growing. Though a recession typically means bad news for commercial properties, the commercial market as a whole is flourishing despite a stagnant office sector, Yun writes in a recent Realtor® Magazine column. Rental demand is booming, and

rents are up significantly. Demand for warehouse space has surged as retailers stock up to avoid supply chain disruptions. Hotel bookings, air travel and park attendance are now above pre-pandemic levels. All of this increased activity has led to high demand for new commercial construction. “The improving construction sector means that any recession will be mild,” Yun said. Despite the positive economic signs, falling homes sales remain a concern. “Home sales are down largely because mortgage rates have risen sharply,” Yun said. “If interest rates rise further, then home sales will decline even more—even if there is no recession.” One longterm solution is to increase housing supply, which is why the Treasury’s announcement is meaningful. The change in ARP guidance could mean significantly more funds going to housing supply and a reduction in costs for buyers over time. Another factor that will help in the short term is employers finding a way to match workers to openings and fill jobs, Yun said. “We still need workers. In an environment with rising mortgage rates, what will drive homes sales is jobs.” August 2022 | Salt Lake Realtor ® | 13

Talking Points to Calm Consumers’ Housing Bubble Fears As concerns about a looming recession mount, help buyers and sellers understand that this market, though volatile, is not on the trajectory of another housing crash. By Melissa Dittmann Tracey

This spring, about 45% of home sellers said they believed the housing market was headed for a crash in 2022, according to a study from Clever Real Estate. To boot, Google Trends data shows a significant spike in searches for the term “housing bubble.” Doomsday fears are mounting as record-high home prices make more consumers and real estate professionals nervous that the market may be overheated. But “we almost surely are not” in a housing bubble, said James McGrath, co-founder of the New York–based real estate brokerage Yoreevo. Still, he’s been fielding concerns from clients lately about how a slowing economy could impact real estate. Most leading housing economists agree that the market isn’t in bubble territory. While home prices have never been higher, the market today is considerably different than in 2008 during the last housing crash. So, arm yourself with some talking points to help answer your clients’ questions about the state of the market and calm their concerns. For one, instead of a housing surplus, like there was in 2008, the nation is facing a severe inventory shortage. Homebuilders put more than 2 million housing units a year into the pipeline in the years leading up to the 2008 bubble and were overbuilding at the time, notes Lawrence Yun, chief economist for the National Association of Realtors®. “Today, it is exactly the opposite,” he said. “The country is still facing 14 | Salt Lake Realtor ® | August 2022

historically low inventory levels and low rental vacancy rates that are the consequences of multiple years of underproduction.” But how about those surging home prices? After all, the median price of an existing home was $407,600 in May—the first time ever that this figure exceeded $400,000, according to NAR data. Have some markets overheated? Possibly. But economists put it into perspective: A 5% price correction in, say, places like Phoenix could be possible—but that comes after about a 50% price gain in just the last two years. “Even if there were to be a localized price correction, it will not cause harm to the [overall] housing market or to the financial banking system,” Yun said. “Some buyers will simply view it as a second-chance opportunity to get into the market after being outbid by others over the past two years, and the balance sheets of the banking industry are quite strong. So maybe prices would adjust downward—or maybe not. Let it be because it doesn’t really matter this time.” Housing dynamics remain strong, even as the doubledigit price appreciation we’ve become accustomed to begins to slow. NAR predicts the pace of price appreciation to moderate to about 5% or 6% by the end of the year. Let’s Talk About It You may hear comments from clients like: “I’m worried

about buying. This is a housing bubble.” Here are some tips and talking points to consider: Don’t dismiss fears. Many homeowners remember the 2008 housing crash, when they may have seen their own home’s value plummet or lost their property to foreclosure. Many millennials, who are the strongest homebuying force today, watched their parents struggle to keep up with their mortgage payments, scaring them off their own homeownership path. Their concerns about a “housing bubble 2.0” may come from a deep place, so acknowledge their fear and let them know that their feelings are legitimate. Mortgages are structured differently. The kind of subprime lending that was blamed for the 2008 crash is a much smaller and more regulated part of the market today. “The lenders and regulators do not want to make the same mistake of lending to people who cannot repay the mortgage,” Yun said. “Therefore, the credit scores of mortgage approvals have been high.” The typical credit score for a mortgage borrower was a nearrecord 776 in the first quarter of 2022. During the Great Recession, it dipped to 707. Plus, for adjustable-rate mortgages, which have fluctuating interest rates over a set period of years, borrowers nowadays must show they can afford the fully reset rate, said Glenn Brunker, president of mortgage servicer Ally Homes. Pixelbliss©/Adobe Stock

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Housing inventories remain low. The nation is roughly 3 million homes short of meeting buyer demand, Freddie Mac estimates. NAR has called for a “once-ina-generation response” to the supply crisis. About 1.2 million single-family housing starts are predicted for 2023—still far from the 2 million–plus in the early 2000s, according to Statista data. Yun said housing inventory likely will remain an issue for years to come. Buyer demand remains high. Purchasing a house was the top accomplishment postgraduate students aspire to achieve—more than getting a successful job, getting married, having a baby, or traveling, according to a Grand Canyon University survey. “There is still too much real demand and too little inventory,” McGrath said about the state of the housing market. “Affordability has taken a hit with higher [mortgage] rates, but people still want to buy homes.” Real estate can be a hedge against inflation. Locking in a fixed-rate mortgage now will protect homeowners against future increases in housing prices. Such an opportunity doesn’t exist when you’re renting, and rental prices have climbed drastically over the last year. Plus, renting doesn’t offer the ability to build equity. A market correction is not the same as a crash. The housing market has showed recent signs of slowing. But “based on present evidence, there is no expectation that a fallout from a housing correction would be comparable to the 2007–09 global financial crisis in terms of magnitude or macroeconomic gravity,” a group of Dallas Fed economists wrote this spring. Some markets may experience a slight decrease in home prices as the market readjusts. In June, more than 40% of home sellers dropped their asking 16 | Salt Lake Realtor ® | August 2022

price in places like Salt Lake City; Boise, Idaho; Sacramento, Calif.; and other Western hot spots, according to Redfin data. Homebuying costs have increased $800 every month this year due to higher mortgage rates and home prices, according to Nadia Evangelou, NAR’s senior economist and director of forecasting. The 30year fixed-rate mortgage, which averaged 2.9% just a year ago, was at 5.51% for the week ending July 14, according to Freddie Mac. “Rising interest rates and buyer fatigue from bidding wars have caused the market to stabilize and return closer to normal, but the market still favors home sellers,” said Scott Orich, a sales associate with Flyhomes in San Mateo, Calif. Orich has been talking to his home sellers about the importance of pricing their home right for the changing market. “Be more realistic with your expectations, and be patient,” Orich said. “The mad rush of multiple buyers is over.” Even though the rise in mortgage rates is certainly bracing for house hunters, a large group of buyers is “more focused on buying a home—and hopefully at a slightly more reasonable price than they’d pay three or six months ago,” McGrath said. Also, “they want to be confident they’re not buying into a repeat of 2008.” And you can help them understand that they are not. Melissa Dittmann Tracey is a contributing editor for REALTOR® Magazine. She can be reached at mtracey@ nar.realtor. Follow her on Instagram and Twitter: @ housingmuse. Reprinted from Realtor® Magazine Online, July 2022, with permission of the National Association of Realtors®. Copyright 2022. All rights reserved.

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Selling a Second Home—at Least a Part of It With new apps, real estate pros are offering clients a way to buy vacation homes at a fraction of the cost. By Melissa Dittmann Tracey Who doesn’t dream of owning a beachfront property or a home nestled in the mountains? For many wouldbe vacation home buyers, though, that dream is out of reach. That’s why some real estate pros are pitching an alternative: co-ownership. By purchasing just a one-eighth or a one-quarter equity share of a home, buyers can lessen their costs and split ownership responsibilities with others. 18 | Salt Lake Realtor ® | August 2022

Tech startups—like Pacaso, SecondShare, and investorfocused solution Fractional—are helping real estate professionals broker co-ownership arrangements among groups of buyers, who may be family, friends, or even strangers. SecondShare said co-ownership could reduce the upfront ownership costs of a vacation home by 75%. “Many people can’t afford the vacation home they’d

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like to own,” said co-founder Patrick Duncan. “For those who can, it often doesn’t make economic sense to own the entire property when they’ll use it for only part of the year. Co-ownership could represent the future of vacation homeownership.” Josh Dotoli, founder and principal of Compass’ Dotoli Group in Fort Lauderdale, Fla., presented the idea recently to one of his buyers. Using the Pacaso platform, his client purchased a one-fourth equity share of a waterfront home. The home would have cost $5 million to purchase outright, but the client purchased a share for $699,000. “Our client got everything he wanted at a price that worked for him,” said Dotoli, who has added a section on his brokerage’s website devoted to coownership opportunities.

Real estate pros are a critical part of fractional ownership transactions, said Marnie Blanco, vice president of industry relations at Pacaso. Companies rely on agents to tout the idea of fractional ownership and to represent buyers who enter into these arrangements. Pacaso said 89% of its buyers are buying a second home for the first time, evidence that coownership is opening up possibilities to a new segment of purchasers. Agents collect a commission when representing each individual buyer in a co-ownership agreement. When pitching the idea of fractional ownership, Pacaso, SecondShare, and their competitors realize they must first clear up an ambiguity: They aren’t selling timeshares. Timeshares sell time or are essentially longAugust 2022 | Salt Lake Realtor ® | 19

Photo by Bailey Anselme on Unsplash

term leases, not collective ownership or a piece of a real estate asset. Co-owners share in the equity. Owners can sell their stake in a Pacaso or SecondShare property publicly after one year of ownership. The tech startups know they need to promote this new class of ownership to get more of the public on board. To do that, Pacaso is partnering with real estate brokerages. Recently, it partnered with Engel & Völkers to sell co-ownerships in Park City, Utah; Aspen and Vail, Colo.; and Malibu, Calif., among other locations. Pacaso also has worked with the Real Estate Standards Organization to help establish co-ownership as a property subtype in RESO’s 2022 Data Dictionary of Industry Standards. “With RESO’s definition of co-ownership as a property type and our ongoing work to establish partnerships with leading brokerages, we are further cementing coownership as a mainstream buying decision,” Blanco said. “We are helping real estate professionals tap into a new group of buyers, those who have always dreamt of owning a second home but were priced out or not ready to commit to the whole.” Learn more about three fast-growing co-ownership real estate startups:

Pacaso After launching in 2020, Pacaso quickly earned “unicorn” status as a tech startup with a billion-dollar valuation. In 2021—its first full year in operation—the company sold 20 | Salt Lake Realtor ® | August 2022

400 units in Pacaso-owned properties. How it works: Pacaso purchases a luxury vacation home through an LLC and then sells ownership shares, oversees management and maintenance, and coordinates time use and payments by owners. It’s in 35 markets in the U.S., Spain, and the United Kingdom, with plans to expand into 30 new markets in 2022. Property shares: Purchasers must buy a minimum of one-eighth share, which allows them to spend 44 nights a year in the home. About the homes: Pacaso’s homes are often valued at $1 million or more, located in second-home hot spots, and professionally designed and furnished. How to finance: Buyers can finance up to 70% of the purchase price. A minimum down payment of 30% is required. Pacaso offers competitive rates with banking partners. For real estate pros: Agents earn a commission for referring buyers. Pacaso also works with buyer’s agents on homes it purchases.

SecondShare Founded in 2021, SecondShare offers co-ownership as a service for virtually any home in the U.S. How it works: It’s a platform that can be used to arrange co-ownership transactions and manages property and ownership details. Co-owners can be matched on the purchase of rental properties or use the

service to purchase equity shares of a property for their exclusive use. Property shares: Co-ownership for vacation rentals is usually sold in one-quarter shares, with a maximum of 50%, to allow each owner 21-plus days of annual use while still allowing enough weeks to generate shortterm rental revenue. Co-ownership for owner use only is typically sold in one-twelfth shares, allowing up to four weeks of property use for each owner. About the homes: The company can arrange coownership for practically any home. How to finance: Buyers can finance up to 70% of their purchase, using cash, a personal line of credit, or financing accessed through SecondShare’s financing partners. For real estate pros: SecondShare pays commissions to listing agents and to agents representing the buyers in a co-ownership transaction.

Fractional Fractional, a member of the National Association of Realtors®’ 2022 REACH cohort, facilitates investment opportunities. How it works: Users can create or join existing investment proposals. Once a property generates

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enough interest and funding, Fractional will make an offer on the property and then form an LLC to divide equity shares among owners. Fractional manages the co-ownership agreements and administrative duties and distributes rental payments among owners. Fractional is primarily in Georgia, Texas, and Florida but can support properties in any U.S. location. Property shares: The minimum investment amount is $5,000. About the homes: Co-ownership investment opportunities are available for residential and multifamily real estate, including single-family homes, duplexes, or entire apartment buildings. How to finance: Fractional’s lending partners provide short- and long-term financing. Interest rates and down payment amounts vary based on location, property type, and loan type. For real estate pros: The company works with agents to close on its purchases. Melissa Dittmann Tracey is a contributing editor for REALTOR® Magazine. She can be reached at mtracey@ nar.realtor. Follow her on Instagram and Twitter: @ housingmuse. Reprinted from Realtor® Magazine Online, July 2022, with permission of the National Association of Realtors®. Copyright 2022. All rights reserved.

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Real Estate Forecast: Market to Ease A housing slowdown precipitated by low inventory and rising mortgage rates will open opportunities for some buyers. By Catherine Mesick Even though national GDP contracted for the second quarter in a row and home sales nationally have fallen for five straight months, property prices are likely to continue growing because of low inventory, Lawrence Yun, chief economist for the National Association of Realtors®, said in July during NAR’s quarterly Real Estate Forecast Summit. Yun offered his economic and housing market predictions for the remainder of this year and into 2023 at the event. One of the most unusual aspects of the current economy is the labor market, Yun said. There were more job openings than unemployed people in May—with 22 | Salt Lake Realtor ® | August 2022

the difference being nearly two to one, according to Bureau of Labor Statistics data. Construction job openings were at a record high in January, and these unfilled jobs point to a potential slowdown in the housing market, Yun said. Both existing-home sales and pending home sales have been falling or stagnant for months, NAR data shows. Rising mortgage rates have combined with low inventory to exert downward pressure on the market. “Closing activity will continue to sink even more,” said Yun. “Some [potential home buyers] don’t want to pay higher monthly rates. Others can’t.”

Hope for Consumers

a good idea to lock in when the rates are down.”

There are bright spots in the market, such as gradually increasing inventory, which is good news for consumers. “They no longer have to make an offer after seeing only one [house],” Yun said. “They can see three or four. It’s returning to a normal process.”

He also noted that foreign investment in U.S. real estate is still well short of pre-pandemic levels but predicted that international interest is likely to increase as travel restrictions ease.

Despite some homes with high list prices beginning to languish on the market, the overall lack of inventory is still leading to price gains. “Even after reductions, prices are still higher compared to one year ago and much higher compared to before the pandemic,” Yun added. Though the Federal Reserve is expected to hike interest rates several more times this year, Yun said mortgage rates won’t rise much further because lenders have already priced in the potential increases. This can mean increased opportunity for consumers. “We may be topping out independent of what the Fed will do,” Yun said. “Rates will go a little up and a little down. It may be

Finally, Yun predicted that in 2022, total home sales will be down 13% from the previous year, home prices will be up 11% and total dollar volume will be down 2%. For 2023, he predicted no increase in home sales, a 2% hike in prices and a 2% increase in dollar volume.

Current Trends and Market Opportunities Jessica Lautz, NAR’s vice president of demographics and behavioral insight, also provided data from the June Realtors® Confidence Index. Among her key findings: •

Median days on market for homes nationwide hit a record low of 14. August 2022 | Salt Lake Realtor ® | 23

Photo by Dillon Kydd on Unsplash

•

The average number of offers per property dipped to 3 from a previous high of 5.

•

Approximately 30% of buyers are waiving inspection and appraisal contingencies—a number that has held fairly steady since the start of the pandemic.

•

The share of all-cash buyers currently stands at 25%. This number has actually decreased from a high of 35% in 2014.

•

First-time buyers are still being sidelined and make up 30% of the market. Historically, they make up around 40%.

In addition, Lautz offered five “touch points”— opportunities for Realtors® to reach out to clients in the current climate. 1.

Twelve percent of buyers are purchasing homes virtually—and they want a Realtors® to assist with the process.

Remote work continues to influence buying trends: 34% of buyers want features that enable them to work from home.

24 | Salt Lake Realtor ® | August 2022

Consumers continue to have a skewed view of the typical amount required for a down payment. Thirty-five percent of buyers believe a down payment of 16% to 20% is required; 10% of buyers believe they need a down payment of more than 20%. However, the typical down payment for a first-time buyer is only 6% to 7%. For a repeat buyer, it’s 17%.

There is value in promoting energy efficiency in listings: Forty-four percent of Realtors® say it’s “somewhat valuable,” and 19% say it’s “very valuable.”

Seven in 10 buyers report a desire for the latest in heating and cooling, windows and doors, insulation, lighting and appliances; however, the typical home purchased is 29 years old and unlikely to have the newest features. This disconnect presents an opportunity for Realtors® to contact previous clients about satisfaction with their current home and any improvements they have made.

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Licensed for 20+ years, Jeff is excited to continue his real estate journey as the Principal Broker for Realty ONE Group Distinction. Holding licenses in 4 different states - giving him a unique perspective in how other markets handle shifts, best practices and an overall deeper understanding of the issues that impact our industry locally. Jeff is committed to his agents success and thinking outside the circle to find solutions to problems that are both ethical and legal. Jeff has been in the Realty ONE Group family since 2014 but has also been with Century 21, Windermere and ERA throughout his career bringing additional insight into his experience. We’re excited to be a part of the South Jordan community but also the Wasatch Front.

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Could Solving the Housing Shortage Help Close the Racial Gap, Too? A new report puts a new number on the nation’s housing shortage—3.8 million homes, more than double where it stood in 2012. By Melissa Dittmann Tracey The nation’s housing shortage has also fueled a housing inequity problem, Bryan Greene, vice president of policy advocacy for the National Association of Realtors®, writes in an essay included in a new report, “Housing Underproduction in the U.S.” To close the widening racial gap in ownership, housing’s underproduction must be widely addressed, he noted. And that problem is only worsening: The Up for Growth report puts a new number on the nation’s housing shortage—3.8 million homes, more than double where it stood in 2012. The deepening inventory crisis 26 | Salt Lake Realtor ® | August 2022

is widening in scope, affecting urban, suburban and rural areas alike and hitting certain minority groups particularly hard, according to the report. “Underproduction in this country has many causes,” Greene writes. “Local zoning and land-use restrictions have, for decades, proved to be one of the greatest barriers to housing construction, affordable housing and diverse communities.” The report noted long historical racial inequities in access to housing, such as from past discriminatory government grants and programs, widespread

exclusionary zoning policies originally designed with racial segregation in mind, racially restrictive covenants written into home deeds from the 1910s to the 1940s, redlining practices that limited access to capital investments to prospective homeowners of color, and urban renewal projects that caused displacement and gentrification.

Where to Go From Here

Housing supply and housing equity can be addressed on multiple fronts such as by expanding the types of housing available for greater income levels and a broadening focus on land use. Greene points to zoning reforms, investments in new construction, expansion of financing, and tax incentives that prompt These have led to a widening racial wealth gap that investment in housing and convert unused commercial has stretched over generations and has made it more space to residential spaces. NAR continues to advocate difficult for families of color to qualify for loans and for incentives in the tax code to promote zoning and afford homeownership, according to the report. The land-use changes, such as tax credits or other support gap between Black and White homeownership rates has to communities that ease zoning rules that had been widened over recent years. These historic and systemic limiting the supply of homes, like minimum lot sizes and constraints combined with underproduction banshousing on multifamily housing. Such policies canhomes, not only A new report puts a housing new number on the nation’s shortage—3.8 million and high prices make homeownership even less help ease housing shortages but ultimately help expand more than double where it stood in 2012. attainable for buyers of color, the report noted. housing opportunities to more people, Greene writes.

Could Solving the Housing Shortage Help Close the Racial Gap, Too?

By Melissa Dittmann Tracey ‘Double Trouble’

“For more than a half-century we’ve witnessed how land-use decisions can limit housing development, In a report released earlier this year, NAR called affordability equity,”Bryan Greene said. “We cannot The nation’s housing shortage has also fueled a housing inequity and problem, Greene, vice president record-high home prices and record-low housing stand by and lament this lack of progress. Now, it is of policy advocacy for the National Association of Realtors®, writes in an essay included in a new report, inventories “double trouble” for real estate, particularly time to act.” “Housing Underproduction in thethat U.S.” To close the widening racial gap in ownership, housing’s for Black Americans. The report found about underproduction be widely addressed, he noted.Melissa Dittmann Tracey is a contributing editor for half of the homes formust sale would require a household income of $100,000 or more to purchase. That has REALTOR® Magazine. She can be reached at mtracey@ placed homeownership increasingly out of reach for a nar.realtor. on number Instagramon and Twitter: @ And that problem is only worsening: The Up for Growth report Follow puts aher new the nation’s number of households: 50% of Asians, 65% of Whites, housingmuse. Reprinted from Realtor® Magazine Online, housing shortage—3.8 million homes, more than double where it stood in 2012. The deepening 75% of Hispanics and 80% of Blacks do not earn enough July 2022, with permission of the National Association of inventory crisis is widening scope, affecting urban, suburban and rural areas alike and hitting certain income to buy these homes, theinreport said. Realtors®. Copyright 2022. All rights reserved.

minority groups particularly hard, according to the report.

Source: “Housing Underproduction in the U.S.” Source: “Housing Underproduction

in the U.S.” “Underproduction in this country has many causes,” Greene writes. “Local zoning and land-use August 2022 | Salt Lake Realtor ® | 27 restrictions have, for decades, proved to be one of the greatest barriers to housing construction, affordable housing and diverse communities.”

JUNE

HOUSING WATCH Active Listings Grow as Home Sales Slow Home sales slowed in Salt Lake County and across the Wasatch Front in the second quarter, increasing the number of houses for sale on the market. In the April-May-June period, single-family home sales fell to 2,800 in Salt Lake County, down 15% from 3,303 sales in the second quarter of 2021. Condominium sales in the county fell to 1,051 units sold, down 23% from 1,373 sales a year ago. Across the five-county Wasatch Front, single family sales settled at 7,140, down 10% from 7,921 sales a year earlier. “After two years of a frenzied market with multiple offers tens of thousands of dollars above asking price, Utah’s real estate market is approaching normalcy,” said Dejan Eskic, chief economist of the Salt Lake Board of Realtors® and senior research fellow at the Kem C. Gardner Policy Institute. “Instead of a home taking a couple days to sell, it probably will take a few weeks.” In the second quarter, new listings of homes for sale in Salt Lake County increased to 5,589, up 5% from a year ago. As of July 28, active listings statewide on UtahRealEstate.com totaled 9,326, up 160% from 3,593 a year earlier. On average, houses in Salt Lake County have been selling at asking price or above asking price for the past 18 months. In May 2021, the sell-to-list price ratio climbed to its highest level at 105%, meaning the typical home that month sold for 105% above asking price. In June 2022, the sell-to-list price ratio fell to 99%, the first time it was below 100% since May 2020. The median price of a single-family home sold in Salt Lake County in the second quarter increased to $625,000, up 19% from $525,000 in the same period last year. The median price of a condominium climbed to $445,000, up 22% from $365,000 last year. Rising inventories will begin to favor home buyers. In addition to more houses for sale, last year was a recordbreaking year in the number of residential permits issued in the state of Utah, helping to erase a statewide cumulative housing shortage, according to a recent report commissioned by the Salt Lake Board of Realtors®. In 2021, the number of new housing units permitted far exceeded that of new households (marriages, divorces, kids leaving home, net in-migration, etc.); 40,144 housing units compared to 26,689 new households. After the record year of 2021, the statewide cumulative housing shortage now stands at 31,000 compared to about 56,000 in 2017.

28 | Salt Lake Realtor ® | August 2022

August 2022 | Salt Lake Realtor ® | 29

understanding of what is going on right now. If you turn on the news or open just about any social media app, all you’ll hear about the real estate market is how it’s a “bubble ready to burst.” The comparisons between today’s market and 2008 are plentiful. Those comparisons would make sense to hobbyists who think the market is “crazy,” but do they make sense to a pro who knows the facts? No. Let’s take a closer look at this comparison between today’s market and the collapse of 2008. It’s seven times more difficult to get a mortgage now than it was in 2008 when lenders were giving out loans to people to whom I wouldn’t have given $20. The average credit score of a borrower today is over 700. These aren’t people who don’t pay their bills. In the four years leading up to 2008, we built twice as many houses as were needed to satisfy demand, creating an oversupply of homes. Today, we have a cumulative deficit of 5.8 million homes to meet the current record demand. That means we would have to overbuild by 1 million homes per year for the next six years just to get back to the equilibrium of supply and demand needed for a healthy market. Does anyone see that happening with inflation running rampant in our economy right now? Nomad_Soul ©/Adobe Stock

Please Stop Saying the Real Estate Market Is ‘Crazy’ This oversimplified view indicates that things are out of control. Is that what you want your customers to think about your business? By Jared James Can we please all come together and make a collective decision as an industry to stop saying that the real estate market is “crazy”? It’s not helping anyone. When things are crazy, they’re out of control—and I don’t think that’s the message we want to communicate to our customers. Are “crazy” and “out of control” how you want your clients to view your workplace, business or industry—one that you’re supposed to understand? The market is complex. The market is complicated. The market is competitive. The market is not crazy. But guess what? That’s exactly why true professionals are needed now more than ever. Anyone can operate in a crazy market, but today’s market requires pros who are grounded and can apply the lessons they’ve learned while navigating these unprecedented times. Rapidly shifting markets like the one we find ourselves in now are what separate the winners from the hobbyists. The question you need to ask yourself is: Which one am I? Part of being a professional is having a real 30 | Salt Lake Realtor ® | August 2022

Currently, over 50% of homeowners have more than $250,000 in equity, and 37% own their homes outright. These aren’t people waiting to default. These are people ready to invest. Mortgage rates have risen to just below 6%, which isn’t good compared to last December. But the historical average is 8%. If you don’t buy, then you have to rent—and rental prices are at an all-time high. More importantly, do you know what the interest rate is when you rent? 100%! At the end of the day, your clients are going to pay someone’s mortgage and build someone’s equity. The question they need to ask themselves is: Whose equity do they want to build—their own or someone else’s? Deceleration does not mean depreciation. While many markets are slowing and are not going to see the 20% to 30% increases in home prices that have occurred in recent years, market predictions for the next five years show a steady gain of 9% this year, 5% next year and 3% to 5% the couple of years after that. The amount of usable equity available to homeowners grew last year by over $11 trillion. That money is going to be invested somewhere, and the housing market is looking a lot better than the stock market right now. At the end of the day, the market may be stressful, but it is not crazy. Here’s the punch line: Success is a stress magnet. If you want to succeed in this market and move forward, you need to focus on being a professional in a sea of hobbyists. Understand that stress not only comes with success but, in many cases, is an indicator that you’re pushing forward and not being complacent.

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