If you have been living in Salt Lake City or along the Wasatch Front, chances are the current real estate market is blowing your mind. Home prices are up 15.4% from last year, with some neighborhoods seeing 40% increases. The Greater Salt Lake area ranks #1 for multiple offers in the nation. Twenty-nine percent of homes sold are transacting in cash. Anytime there is a significant market upheaval or shakeup like this, rumors and speculations tend to come out of the woodworks. We want to guide you through some of the most prevalent myths and truths about the Salt Lake & Wasatch Front real estate market in 2021.
MYTH: This is just a bubble. Prices will go down soon.
The Wasatch Front has seen consistent home-price increases since the Great Recession, with the incline steeply rising over the last five years. If you bought a home in the Greater Salt Lake area just five years ago, chances are your property has almost doubled in value. Utah’s population is only expected to keep growing: predicted to double by 2050. People are flocking to our city (we became a top-ten place to relocate during COVID) and no one is really leaving. Demand from out-of-state investors, out-of-state newcomers, Millennial, & Gen Z buyers is only expected to keep rising. Be assured, this market is not a bubble, but a new reality.
MYTH: It will be easier to just build a new home than compete with multiple-offer situations.
Unfortunately, new-build buyers are in the same pickle as every other buyer. All buyers are dealing with intense competition and multiple-offer situations due to lack of inventory. Builders themselves are also in a bind with commodity prices rising 200-400% coinciding with once-in-a-generation supply shortages. Many are choosing not to sign new contracts or limiting contracts. Some are canceling or rewriting their original contracts to reflect commodity price increases. Buyers are then required to have the financing to accommodate price increases or lose the home. Whether you are a new-build or existing-home buyer, plan on paying more and waiting longer to close than in years past.
MYTH: The market is so hot right now, I’ll save some money and just list myself.
While it is true that your home will sell faster and for a lot more than it would have a year ago, a hot sellers market does not equate to getting the best price for your home. There is still a significant price difference between a home that is properly prepared before listing and well represented than those that are not. We are seeing our listings, prepared with our Niche Homes Way services, closing at prices 10-15% (and up to 25%!) higher than other comparable properties. Also, with stakes as high as they are, and most owners facing multiple-offer situations, there are shrewd negotiating and strategy skills required. Choosing a competent Realtor, like us, ensures you will most likely earn back at least the cost of commission and possibly more. Plus you’ll avoid the uncertainty, surprises and stress of going it alone!
MYTH: There is no way I can find the home I want right now.
There is always the right home out there waiting for you! We are advising our buyers to shift their expectations this year: expect 3-6 months from start to close rather than the usual 1-2 months. We also advise our buyers to be open minded about different neighborhoods and contract contingency options. Just recently, we helped a couple moving from Boston buy a home start-to-close in just two weeks! It helped that they had solid financing, knew what they wanted and had our advice and negotiating skills on their side. It can be done! Buyers take heart knowing that there are still hidden gems to be found and won.
UNCERTAIN: Since I can’t or don’t want to buy right now, a good solution is to remodel.
Investing in your home wisely (keeping resale in mind) is always a good investment. But right now may not be the best time to take on a new home-construction project. Commodity prices have risen 200-400% (with wood topping out at 400%). Contractors have up to 2-year waitlists, and many are increasing their fees from 15% to 20% in response to demand. Senior Interior Designer Kayley Danielson has this advice, “You can have what you want right now, you just have to be realistic about budget and timeline. And it’s probably likely that the cost of commodities won’t go down anytime soon. We all have to adjust to the idea of a higher cost of living here.” But waiting may be the best idea for now. Hard-to-find materials like windows, concrete, wood, plumbing and lighting will probably be more available a year from now when supply chains have recovered from COVID delays.
UNCERTAIN: If I wait until the end of the year, there will be more homes on the market.
There is some indication that inventory is starting to loosen up along the Wasatch Front. People are starting to move for jobs or other opportunities, and new-build construction is picking up pace. Looking to next year, inventory rates will be up, but by how much is uncertain.
TRUTH: I need to have a strong financial pre-approval letter or cash for a seller to take my offer seriously.
As we mentioned earlier, 29% of homes are transacting in cash along the Wasatch Front. Many people are getting creative and coming up with cash, and then paying themselves back with a refinance after close. But cash offers are still the minority, and we are seeing plenty of success with vetted pre-approval. Mortgage lenders are getting more and more involved in advocating for their clients during the offer process by providing fully-vetted pre-approval letters, personal phone calls to listing Realtors, or offering proof of funds that lets sellers know how solid an offer really is. We also have relationships with reputable credit-repair services and we’ve seen success with clients committed to improving their buying power. Where there’s a will, there’s a way!
TRUTH: You need determination and preparation to purchase a home in 2021.
There is no rest for the weary in the 2021 real estate market. Buyers who want a home need to be ready to act and 100% prepared. First, serious buyers must make themselves physically available. Successful buyers tour homes within 1-2 days of listing. Second, successful buyers are also mentally ready to make quick decisions. Financing should be in order, and an offer written quickly after touring a home. We like to see our buyers 100% prepared and ready for mission possible.
TRUTH: Interest rates will never be better.
Interest rates are rock bottom and haven’t been this low since November 2012. While rates crept up slightly in March, they are experiencing a drop again. The Fed has hinted that it will keep rates where they are through next year. But low rates are a double-edged sword for real estate: the real estate market will stay hot while rates are low. Once rates go up, demand will trickle off and price increases and multiple-offer escalations will slow. This cooling off may offset costs from rate increases. So while interest rates may never be better, that doesn’t mean you are going to lose out by waiting to buy. It’s best to make decisions on your needs and the economic situation at hand. If there’s one thing we’ve learned this past year, it’s that the future will consistently surprise us! Buying a home now, or in a year from now, will always be a good investment in Salt Lake City or along the Wasatch Front.