To everyone’s surprise, Salt Lake’s bullish real estate market is the breakout hit of the summer. Local metrics show today’s market is as strong as it was three months ago before the COVID-19 pandemic hit. Experts estimate that while single-family home sales will still be down 5% in 2020, the median sale price of a home will increase by about 5%. With unemployment, job and socio-political insecurity on the rise, this seems counterintuitive. Here are five reasons Salt Lake real estate prices are going up during the ongoing COVID-19 pandemic.
1—Historically Low Interest Rates
The success of the real estate market over the last few months is primarily attributed to low interest rates. According to Kelle Smart from Academy Mortgage Corp, “Mortgage rates have again fallen to a new all-time low…There is a distinct possibility that the average 30-year fixed-rate mortgage could dip below 3 percent later this year.”
Sarah Cresap of Fairway Mortgage gives accolades to the Fed for keeping the real estate market buoyant. “[They have] found the perfect strategy of buying up enough mortgage-backed securities each day to keep the banks flush in cash, but not so much that it would create an artificial demand and cause the interest rates to go up.”
2—Unforeseen Listing Shortage
Stress, anxiety and perceived market uncertainty are discouraging Salt Lake sellers from listing their home. James Wood, Ivory-Boyer Senior Fellow at the Kem C. Gardner Policy Institute, cites the number of home listings as, “down 18% from last year, exacerbating the existing inventory shortage.” This listing void is putting upward pressure on prices and counteracting other market forces to keep Salt Lake a sellers’ market.
3—New Construction Slowdown
Before the March coronavirus outbreak, Salt Lake was facing a serious housing shortage. Since then, pressure on the market has only mounted. There has been a slowdown of construction materials from China and local government permitting and inspections are being delayed by office closures. New-build permits have decreased 5% and it is estimated new construction will decline another 5-10%.
4—Impact of Remote Working
A Kaiser Family Foundation poll in May found that 34 percent of employees were working remotely from home. Homeowners and renters otherwise content with their on-the-small-side living quarters, are now looking for more space and more yard. Large national employers are also beginning to provide employees with monthly home-office stipends. Stipends like these make upsizing a more affordable and attractive option, especially if you don’t know exactly when you’ll be going back to the office.
Residents of large cities hit hard by the pandemic —New York, Los Angeles, Seattle— are looking for new places to work remotely or to move back home near family and friends. Young families especially are looking to trade the confines of their apartment for more space. In May, realtor.com saw searches in suburban zip codes spike 13%, doubling the pace of urban growth. Salt Lake City is currently ranked by the National Association of Realtors (NAR) as one of the Top 10 Most Favorable Areas for Millennials During the Pandemic. As urban flight continues from our country’s largest metro areas, mid-size cities like Salt Lake can expect an influx of young professionals eager to be homeowners.
Now is a Good Time to Buy and Sell
Many buyers and sellers have put their plans on hold the last four months waiting to see what the market will do. What the data from the last few months is telling us is that the Salt Lake market is not changing. In all the uncertainty we face, it is strange to think there is one constant: the Salt Lake housing market is staying the course. The market a year from now will likely look about like it does today. So if you are thinking of making a move, now is a great time to do it.
Niche Homes is a boutique real estate agency specializing in Salt Lake neighborhoods and enclaves. As Salt Lake’s premier listing agent, we can advise you on your options and look out for your best interests during COVID-19. Contact us today for a no-pressure consultation about selling your home, buying a home or moving to Utah.