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Market Updates for February 2024

Market Updates for February 2024

February brings an exciting shift in the property management business. Beginning next month, we officially bid farewell to the "slow season," and begin preparations for the upcoming summer leasing season. In this update, we're excited to explore all the latest economic news, along with some updates from the ongoing legislative session. We'll also be taking a deep dive into what's going on in Utah's real estate market and share some industry news that could impact both property management and homeowners. But first, the headlines.

Headlines

January Jobs Report - In January, the U.S. labor market exceeded expectations with 353,000 new nonfarm payroll jobs, far surpassing the forecasted 185,000, and maintaining the unemployment rate at 3.7% instead of the predicted 3.8%. Average hourly earnings doubled the monthly estimate, rising by 0.6%, with a year-over-year increase of 4.5%, higher than the forecasted 4.1%. Job growth was widespread across various sectors, notably professional and business services, health care, and retail trade. Despite concerns about concentrated job gains in certain sectors, the report indicated a healthy labor market, supported by upward revisions in December's job gains. Sadly, this robust jobs report may delay Federal Reserve interest rate cuts, with futures markets now indicating an over 80% chance that rates will remain unchanged in March. However, questions linger about the durability of the labor market trend, especially considering potential divergences between wage growth and hours worked. Despite inflation concerns, recent data suggests inflation may be moderating, offering a complex backdrop for the Fed's monetary policy decisions.

Weekly Jobless Claims - Despite high-profile layoff announcements, weekly jobless claims in the United States dropped by 9,000 to 218,000, surpassing expectations and indicating continued strength in the labor market. This decline, along with a decrease in continuing claims to 1.871 million, suggests resilience in the economy despite recent layoffs, particularly in the technology sector. Economists note that the absence of significant job losses contradicts concerns of a recession, attributing the stability to a strong labor market, rising worker productivity, and employers' reluctance to downsize amid labor shortages. The sustained labor market strength has led to speculation of delaying anticipated interest rate cuts by the Federal Reserve, with markets adjusting expectations accordingly. Despite some fluctuations, the overall outlook remains optimistic, with laid-off workers finding new jobs relatively easily in the robust labor market. Additionally, in Utah, jobless claims declined to 1,253 from 1,316 in the prior week, marking a decrease of 63 claims.

Consumer Price Index - The anticipation builds as we await the upcoming release of the Consumer Price Index (CPI) on February 13 following a stunner of a January Jobs Report. The previous report revealed stubbornly persistent inflationary pressures, with consumer prices in the U.S. surpassing expectations. December saw a 0.3% monthly increase and a 3.4% year-over-year rise, exceeding estimates of 0.2% and 3.2%, respectively. The core CPI, excluding volatile food and energy prices, echoed this trend, with a 0.3% monthly increase and a 3.9% annual rise, slightly surpassing estimates. Notably, shelter costs saw a significant 0.5% monthly increase, contributing over half to the core CPI surge. Adjusted for inflation, wages showed a modest 0.2% gain for the month and a 0.8% increase from a year ago. Despite acknowledging inflationary pressures, the Federal Reserve maintains a cautious stance on interest rate cuts, reflecting the complexity of economic factors at play.

Fed Meeting - The Federal Reserve recently concluded its two-day meeting scheduled on January 30-31st and signaled a halt to interest rate hikes while expressing reluctance to initiate cuts in the near term, diminishing expectations for a March decrease. Despite removing language suggesting a willingness to continue rate hikes until inflation reaches the Fed's 2% target, the statement emphasized the absence of plans for rate reductions as inflation persists above the target. While Fed Chair Jerome Powell indicated the unlikelihood of a March rate cut, market reactions were mixed, with stocks falling and Treasury yields plunging following his remarks. Policymakers, wary of economic uncertainties, emphasized the importance of data in guiding future policy adjustments, leaving the possibility of further rate increases somewhat open. The Fed is clearly being very careful here following a shocking January Jobs Report, and will look to see if next week's CPI report brings more inflationary concerns before committing to rate cuts in the near term.

Legislative Update #2 2024

Our friends at the Rental Housing Association of Utah, are tracking all of the pending legislation that impacts Utah landlords in the current session. Please find their latest update on the 2024 legislative session below:

HB 169, proposed by Neil Walter, introduces property condition disclosure requirements aimed at enhancing transparency in rental agreements. Modeled after real estate sale disclosures, the bill mandates landlords to provide written disclosures detailing any defects in rental units to prospective tenants during the application process. This measure seeks to empower renters with essential information for informed decision-making while renting. However, discussions are underway to explore alternative solutions to address concerns raised by the bill, ensuring a balanced approach that considers the interests of both landlords and tenants.

SB 58, led by Grover, addresses property tax administration amendments, with a focus on streaming documentation requirements for landlords to validate residential use. The bill aims to simplify the process for landlords to qualify for property tax discounts applicable to long-term rental properties used as primary residences. By limiting county assessors' requests for specific documents, such as lease agreements or tax returns, the bill seeks to alleviate administrative burdens and ensure a more efficient tax administration process. However, ongoing amendments are being considered to address technical issues and optimize the bill's effectiveness in supporting landlords and property owners.

SB 116, initiated by Jen Plumb from Salt Lake City, highlights concerns regarding eviction notice requirements, particularly in cases involving animal control. The bill seeks to enhance protections for renters' pets during eviction processes by mandating certain notices from animal control agencies in cases where animals are removed from properties post-eviction. While the bill's title may raise apprehensions, it primarily focuses on improving animal welfare and responsiveness from animal control agencies rather than imposing additional burdens on property owners and managers. Collaborative efforts are underway to ensure the bill aligns with industry interests while addressing the welfare of animals affected by eviction proceedings.

Additionally, attention is directed towards HOA rules, with ongoing efforts to clarify regulations concerning units within communities. Advocacy initiatives aim to safeguard owner’s rights, including the ability to conduct remediation if needed and opposing mandatory usage of HOA lease agreements. Furthermore, efforts are underway to establish guidelines for HOAs regarding lease duration, ensuring flexibility for both landlords and tenants while maintaining community standards.

Other issues such as eviction expungement and notice of rent increase remain unresolved.

Utah Real Estate Market

January brought notable developments to Utah's housing market, offering insights into ongoing trends and shifts in the real estate landscape. Despite a slight uptick in the median sold price, rising to $550,000, the market experienced a marginal increase of just 0.03% compared to the previous month. However, year-over-year statistics reveal a more promising picture, with a 2.52% increase in median sold price. Conversely, the sold count witnessed a significant decline of 6.84% from December, indicating a slowdown in market activity. However, compared to the same period last year, there's a noteworthy uptick of 17.36% in the sold count, suggesting some pent up demand. Additionally, the average number of listings recorded a substantial decrease of 14.21% from December, signaling tightening inventory. The year-over-year comparison shows a more moderate decline of 9.36%, but still reflects a market where sellers seem to be waiting out interest rate cuts in hopes it will spur buyer demand.

Median Sold Price*

Sold Count*

Average # of Listings*

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

 

January: $550,000

January: 835

 

February: 1,113

 

March: 1,454

 

April: 1,308

 

May: 1,518
June: 1,522

 

July: 1,372

 

August: 1,451

 

September: 1,130

 

October: 1,192

 

November: 1,034

 

December: 1,052

 

January: 980

January: 4,143

 

February: 3,662

 

March: 3,333

 

April: 3,350

 

May: 3,480
June: 4,022

 

July: 5,522

 

August: 4,801

 

September: 5,121

 

October: 5,166

 

November: 4,809

 

December: 4,377

 

January: 3,755

Monthly Change: Up 0.03%
Year Over Year: Up 2.52%

Monthly Change: Down 6.84%

 

Year Over Year: Up 17.36 %

Monthly Change: Down 14.21%

 

Year Over Year: Down 9.36%

* all graphs/data are for single-family homes in Salt Lake, Utah, and Davis Counties.

Rent Report

The latest rent report offers insights into the rental market dynamics across several cities in Utah. In Draper and Salt Lake City, rents experienced slight month-over-month increases of 0.2% and 0.9%, respectively, reflecting modest growth. Conversely, Murray, Orem, Sandy, South Jordan, and West Jordan saw marginal declines ranging from -0.3% to -2.6%, indicating some softening in rental prices. However, when examining year-over-year trends, most cities exhibited negative rent growth, with West Jordan experiencing the most significant decrease at -6.1%, followed by Murray at -2.4% and Salt Lake City at -1.9%. These figures suggest a mixed landscape in Utah's rental market, with certain areas demonstrating resilience amidst economic uncertainties while others face downward trends. The data underscores the importance of local factors and economic conditions in shaping rental dynamics, with variations across different cities highlighting the diverse nature of Utah's rental market.

Utah
 City*

Month Over Month
 Rent Growth

Year Over Year
 Rent Growth

Draper

 

Murray

 

Orem

 

Salt Lake City

 

Sandy

 

South Jordan

 

West Jordan

0.2%

 

-2.6%

 

-0.5%

 

0.9%

 

-0.4%

 

-0.5%

 

-0.3%

0.7%

 

-6.1%

 

-0.9%

 

-0.8%

 

-2.4%

 

-1.9%

 

-5.4%

*Rental data provided by apartment list.

Industry Updates

Mortgage Rates Exceed 7% Amid Stronger Economic Data - Mortgage rates soared above 7% for the first time since December, hitting 7.04% on Monday, February 5, propelled by a series of robust economic indicators, notably January's employment report and a strong monthly manufacturing report. This sharp uptick follows a period of volatility, with rates briefly reaching a 20-year high of 8% in October before experiencing a notable decline. Investors initially anticipated the end of the Federal Reserve's interest rate increases, leading to this downward trend. However, the recent surge suggests a shift in sentiment, with the market reacting to unexpectedly strong economic data. Despite the increase in rates, there has been a noticeable resurgence in buyer activity, coinciding with a slight uptick in homes for sale. However, total inventory remains historically low, contributing to heightened competition and sustaining elevated home prices. The impending spring housing market underscores the significance of mortgage rates, as they directly impact affordability, especially given the continuous rise in median home prices, which reached a record high of $382,600 in December. With mortgage applications for home purchases showing signs of slowing down in response to rising rates, the trajectory of rates in 2024 hinges on a multitude of factors, including economic indicators and inflation trends. Should data continue to reflect a strong labor market and inflationary pressures, rates may struggle to drop back below 7%, underscoring the intricate relationship between economic dynamics and mortgage rate movements.

Keller Williams Realty Settles Nationwide Lawsuits for $70 Million - Keller Williams Realty Inc., a major real estate brokerage, has agreed to a $70 million settlement to resolve over a dozen lawsuits nationwide concerning agent commissions, with the aim of providing greater transparency. The settlement, filed with federal courts in Illinois and Missouri, follows a federal jury ruling in October against Keller Williams and other large brokerages, alleging unfair practices that inflate agent commissions. The agreement seeks to release the company, its franchisees, and agents from similar lawsuits nationwide and includes commitments to transparency, such as informing clients that commissions are negotiable and disclosing compensation structures. This settlement, along with similar agreements reached by other major brokerages last year, underscores the industry's commitment to fair practices and consumer empowerment in the real estate market.

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