Why is Utah’s housing market so hot?
Home buyers are offering $20,000-$30,000 over list price just to secure a home. Builders have 10-15 buyers for every home they construct. Dozens of buyers compete for every entry-level home. In one case, an offer $15,000 over list price wasn’t enough to entice a seller.
These are just a few stories about Utah’s hot seller’s market from those familiar with current housing conditions.
A new paper for the Kem C. Gardner Policy Institute at the University of Utah attempts to explain the phenomenon of Utah’s housing market resiliency amid the COVID-19 pandemic. This week, the organization hosted a panel presentation with housing market experts and published a new research brief titled, “What’s Keeping Utah’s Real Estate Market Hot in the Time of COVID?”
Dejan Eskic, senior research analyst at the Policy Institute and author of the research brief, attributes the robust real estate activity to three factors: pent-up demand, record low resale inventory and historically low mortgage rates.
Here’s how these three factors are affecting Utah’s housing market:
Utah has a housing shortage with more people wanting to buy homes than there are homes available. During the panel presentation, Eskic said Utah has about 53,000 more households than it has housing units. This is driving up home prices.
Meanwhile, Eskic notes that Utah has a home-building boom with officials approving a record 13,792 building permits for the first six months of 2020.
Still, the panelists say more needs to be done to keep up with Utah’s growth as more people move into the state.
Boyd Martin, Utah division president with homebuilder D.R. Horton and a panel participant, says one of his biggest obstacles to building more homes is the lack of land and the resistance to high-density housing. He noted that even though his company makes about the same percentage of profit on each home as they did in the early 2000s, the costs to build a home have increased significantly, which has resulted in high prices for homebuyers.
Martin and Dave Robison, president of the Utah Association of Realtors and a panel participant, both say the majority of the housing demand is not from investors. It is from people who want to live in the homes.
Record Low Resale Inventory
Even though it’s a great seller’s market, some homeowners are hesitant to list their homes because of the pandemic. Eskic’s report notes that the average number of listings between May and August is down 31% compared to the same period in 2019.
Robison said he’s seeing a 53% decline in housing inventory as people quickly buy available homes. He said he’s also seeing a record in the number of houses that are currently under contract.
Out-of-state buyers are also snatching up Utah housing inventory. With the rise in remote work, Robison and Martin say they are seeing many people moving here from California and other states to take advantage of the Utah lifestyle.
Historically Low Mortgage Rates
Low mortgage rates are also driving homebuyer activity.
Even though home prices have increased, mortgage payments remain manageable. According to the report, the payment for the median-priced home of $355,000 in June 2019 was $1,655. In June 2020, the median sales price was $380,000, yet the monthly payment fell to $1,636 because of the decline in rates.
“Declining mortgage rates have incentivized buyers to lock in an historically low rate,” the report said.
To read the report in its entirety, visit Gardner.Utah.edu. To learn more about what’s happening in the housing market in your area, contact a local Realtor. Find one at MyRealtorStory.com.