Utah’s Housing Shortage: How Did We Get Here?

When the pandemic first began there was a sense of concern for the real estate market as fears of another market crash arose. Earlier in the year, we did see a dip in the market locally and nationwide. We are now seeing a surge. Why is this happening? Well, it is a combination of a few different factors, supply, mortgage rates, and location. 

Utah’s Perfect Storm 

The Utah market has seen a massive surge this year. The demand for homes was already high pre-pandemic. As the year goes on, we are only seeing an increase in that demand. We are only seeing houses stay on the market for a median of 12 days. It takes half the time to sell a house today than it did last year. In the month of August 2020, 5,201 total homes were sold with a median price of $362,000. 

The only downside we are seeing to this massive surge is the lack of inventory. While we have seen in the past that Utah has had a problem with inventory, and that problem has been heightened during this current time. When we compare the data from this August compared to last year, we can clearly see this shift. The market now has more pending sales than it has houses on the market, while last year it was the reverse scenario. 

Utah has seen an increase in the number of people wanting to move here for various reasons, this increase in population, and the fact people are staying in their homes longer has led to a market where there are more buyers out in the market then there are sellers.   

Inventory

It’s not only Utah. We see similar trends across the country. The demand for real estate in the Utah market is increasing, but the inventory is starting to dwindle. To put it simply, homes are selling too quickly for the market to keep up. Specifically for Utah, there are 5,184 active listings and 9,995 pending sales. There is a 3 month supply at the current sales pace, which is well below the 6-month pace needed to keep a balanced real estate market.  The national housing inventory has seen a decline including decreases in the inventory of newly listed properties. Due to this shortage, homes are selling up to 18 days faster than the year prior. There has also been an increase in the average price of a  sale; 8.5% more than last year

Even though we see a limited supply in the housing market, there is still a strong demand for the buyer’s side. 

Mortgage Rates

The biggest reason that people are so willing to buy homes at this time is because of the interest rates. According to Windermere Chief Economist Matthew Gardner, In the August reports, for a 30yr fixed-rate mortgage, the interest rate is at a shockingly low rate of 2.9%, last year the rate was sitting at 3.73%. These are historically low numbers. 

With the housing prices rising and the interest rates being so low, you have to look at the difference between the price and the actual cost of the houses you are buying. Even though the house price is higher, with lower interest rates, the monthly mortgage payments are still comparable. With lower rates, it costs less to borrow money from lenders to get the money for your house. This means that buyers may be able to afford more house than initially expected, and is pulling buyers onto the market. 

Why Does This Matter? 

This high demand for homes is predicted to continue on throughout the year, and possibly carry over into 2021. On the buyer’s side, we see historically low-interest rates, which can help counteract the rising price of houses. On the other side, sellers are getting more for their listings than before with the increasing price of houses, and heavy demand will decrease the time needed for your home to sell. The main issue on hand is the housing shortage, and only time will tell how that will affect the market in the long term.

For weekly updates on the housing market, keep an eye on the Windermere Utah Facebook page, as every Monday we post “Mondays with Matthew,” a video update from our Chief Economist about the market.

Posted on October 6, 2020 at 10:58 pm
Matthew Sidford | Category: Market Trends | Tagged , , , ,

The Gardner Report – Park City – 2020 Second Quarter

The following analysis of select neighborhoods in the Park City real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you in making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere agent. 

 

ECONOMIC OVERVIEW

COVID-19 had a significant impact on employment in Utah, causing the loss of more than 144,000 jobs in March and April and raising the state’s unemployment rate to 10.4%. For comparison, peak unemployment following the Great Recession was only 8%.

That said, it appears as if Utah’s massive contraction in employment is behind us (at least for now). Employment in the state rose by 40,400 jobs in May, an increase of 2.8% in just one month, allowing the unemployment rate to drop to 8.5%.

Although it is certainly too early to say that we are out of the woods, we seem to be headed in a positive direction. That said, COVID-19 infection rates in Utah started increasing in June and may slow the economic recovery if the direction is not reversed. Regardless, I do not believe that it is likely to have a significant impact on the housing market.

 

HOME SALES

❱ In the second quarter of 2020, 131 homes sold in the Park City area, a drop of 37.3% from the second quarter of 2019, and down 22.9% from the first quarter of this year.

❱ Home sales were a mixed bag, with increases in 4 neighborhoods but declines in 14. The areas that saw sales activity increase are all very small.

❱ The drop in sales came as inventory levels rose more than 300%. The most likely explanation is that concerns over COVID-19 outweighed the additional choice of available homes.

❱ Pending home sales were 15.6% lower than a year ago, but only 3.1% lower than in the first quarter. This makes me hopeful that the market will start to stabilize as we move through the balance of the year.

 

 

HOME PRICES

❱ The average home price in the Park City neighborhoods contained in this report rose 1.9% year-over-year to $1.159 million. Sale prices were 0.6% higher than in the first quarter of 2020.

❱ The most affordable neighborhoods in terms of average sale prices were Kimball, Heber North & East, Wanship, Hoytsville, Coalville, and Rockport. The most expensive were Upper Deer Valley Resort & Empire Pass, Promontory, and Thaynes Canyon.

❱ Prices rose in a majority of neighborhoods, with significant gains in the Promontory, Thaynes Canyon, Jeremy Ranch, and Lower Deer Valley Resort & Deer Crest neighborhoods. Annual sale prices dropped in seven markets, with the Canyons Village area experiencing the steepest decline.

❱ The Park City market is relatively small, but with some very expensive real estate. It will be interesting to see if COVID-19-related impacts persist or if we start to see a return to normal activity.

 

 

DAYS ON MARKET

❱ The average time it took to sell a home in the Park City area rose three days compared to the second quarter of 2019.

❱ The amount of time it took to sell a home dropped in nine market areas and rose in nine compared to a year ago.

❱ In the second quarter of this year, it took an average of 101 days to sell a home. Homes sold fastest in Summit Park and slowest in the Canyons Village neighborhood.

❱ The greatest drop in market time was in the Tuhaye/Hideout neighborhood, where it took 91 fewer days to sell a home than during the same period a year ago.

 

 

CONCLUSIONS

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

Clearly, the Park City housing market was still reacting to the influences of COVID-19 during the second quarter. I see demand, but the pandemic is still making the direction of housing uncertain. That said, I remain hopeful that we will start to get some clarity as we move through the balance of the year. Assuming the state gets new infection rates back under control, I can see the market start to perform at its potential in the second half of the year. As such, I am leaving the needle in the same position as last quarter.

 

 

ABOUT MATTHEW GARDNER

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.

 

Originally posted in Park City Real Estate Market Update by Matthew Gardner, Chief Economist, Windermere Real Estate

Posted on August 3, 2020 at 6:07 pm
Matthew Sidford | Category: Market Trends, Park City | Tagged , ,

The Gardner Report – Park City – 2020 First Quarter

We are excited to introduce the Gardner Report to Park City, Utah! The following analysis of select neighborhoods in the Park City real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere agent. 

 

A MESSAGE FROM MATTHEW GARDNER

Needless to say, any discussion about the U.S. economy, state economy, or housing markets in the first quarter of this year is almost meaningless given events surrounding the COVID-19 virus.

Although you will see below data regarding housing activity in the region, many markets came close to halting transactions in March and many remain in some level of paralysis. As such, drawing conclusions from the data is almost a futile effort. I would say, though, it is my belief that the national and state housing markets were in good shape before the virus hit and will be in good shape again, once we come out on the other side. In a similar fashion, I anticipate the national and regional economies will start to thaw, and that many of the jobs lost will return with relative speed. Of course, all of these statements are wholly dependent on the country seeing a peak in new infections in the relatively near future. I stand by my contention that the housing market will survive the current economic crisis and it is likely we will resume a more normalized pattern of home sales in the second half of the year.

 

HOME SALES
  • In the first quarter of 2020, 170 homes sold, an increase of 18.9% over the first quarter of 2019.
  • Sales were a mixed bag, with increases in eight neighborhoods, sales static in three, and dropping in seven. There was double-digit growth in sales in several areas. However, as the market areas in this report are all relatively small, significant swings in either direction are not unexpected.
  • The growth in sales came as inventory levels fell by a very significant 70% from a year ago. This can likely be attributed to COVID-19. Second quarter data will confirm or refute this thesis.
  • Pending home sales dropped 40% compared to the first quarter of 2019. Again, this is likely due to COVID-19.

 

 

HOME PRICES
  • The average home price in the Park City neighborhoods contained in this report dropped 2.1% year-over-year to $1.152 million.
  • The most affordable neighborhoods — in terms of average sale prices — were Kimball and Kamas & Marion. The most expensive were Lower Deer Resort & Deer Crest, Promontory, and Upper Deer Resort & Empire Pass.
  • Although aggregate prices went down, prices still rose in a majority of the neighborhoods that this report analyzes. The Summit Park area had significant gains, and an additional eight areas had double-digit increases. On an annual basis, prices dropped in four markets, with the Upper Deer Valley area seeing the biggest declines.
  • As this is the first Park City Gardner Report, commentary is limited. It will be interesting to see how the market further reacts to COVID-19 and we look forward to offering analysis and perspective when we get second quarter data.

 

 

DAYS ON MARKET
  • The average time it took to sell a home in the Park City area dropped 42 days compared to the first quarter of 2019.
  • The amount of time it took to sell a home dropped in 13 market areas and rose in 5.
  • In the first quarter, it took an average of 99 days to sell a home, with homes selling fastest in Thaynes Canyon and slowest in the Promontory neighborhood.
  • The greatest drop in market time was in the Thaynes Canyon and Heber North & East neighborhoods.

 

 

CONCLUSIONS

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

Given the current economic environment, I have decided to freeze the needle in place until we see a restart in the economy. Once we have resumed “normal” economic activity, there will be a period of adjustment with regard to housing. Therefore, it is appropriate to wait until later in the year to offer my opinions about any quantitative impact the pandemic will have on the housing market.

 

 

ABOUT MATTHEW GARDNER

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures

Posted on May 1, 2020 at 6:34 pm
Matthew Sidford | Category: Market Trends | Tagged , , , ,