Thursday, March 25, 2021

Utah’s spring home-buying season is off to an early start as bidding wars and intense buyer competition continue to define real estate markets in the state. With significant demand for homes right now, there are simply not enough for-sale properties to go around.

In fact, the inventory of homes for sale fell 64% from one year ago, according to February 2021 statistics from the Utah Association of Realtors. That means for about every three properties that were available last year, there is now only one.

In some counties, the drop was even steeper. In Washington, Utah and Tooele counties, for example, inventory fell 77%, 72% and 70% respectively.

The lack of home listings has kept sales lower than what they otherwise might be. Statewide, February home sales fell about 3% compared to a year ago. However, housing activity remains very strong. Even with the slight decline, it’s still Utah’s second-best February on record with Utah Realtors selling 3,449 properties.

For counties with at least 50 sales, the top performers were Uintah County with an 89% gain and Summit County with a 44% increase in home sales compared to last year.

“Despite the drop in home sales for February — which I would attribute to historically low inventory — the market is still outperforming pre-pandemic levels,” said Lawrence Yun, chief economist of the National Association of Realtors, in a press release about February U.S. existing home sales.

Not only are tight housing supplies constraining sales, but they are also pushing up prices.

In February, Utah home prices increased 15% to $385,000. That’s a gain of more than $50,000 compared to the median price of $334,675 in February 2020.

Along the Wasatch Back, home prices skyrocketed. In Summit County, home prices increased 40% from last year to a median of $1,212,500, and Wasatch County saw a gain of 27%.

Across the state, increases in prices and mortgage rates cut into affordability. The Utah Association of Realtors Housing Affordability Index feel 6% compared to last year.

Yun says the best solution for keeping home prices affordable is to provide more supply to the market through home-building.

“Home affordability is weakening,” Yun said. “Various stimulus packages are expected and they will indeed help, but an increase in inventory is the best way to address surging home costs.”

While interest rates have increased in recent weeks, Yun expects mortgage rates to remain in the low 3% range for the year. On Thursday, Freddie Mac said the weekly average rate on a 30-year fixed-rate mortgage was 3.17%. That’s lower than the 3.5% average last year at the same time but higher than the rates that were under 3% over the past few months.

“I still expect this year’s sales to be ahead of last year’s, and with more COVID-19 vaccinations being distributed and available to larger shares of the population, the nation is on the cusp of returning to a sense of normalcy,” Yun said, “Many Americans have been saving money and there’s a strong possibility that once the country fully reopens, those reserves will be unleashed on the economy.”

As buyers face unprecedented challenges, it’s more important than ever to work with a local Realtor who understands the market conditions. Your Realtor will help you craft a competitive offer and guide you through the pitfalls associated with this fast-moving market.

Click here to find a directory of local Realtors who specialize in your area.

Thursday, March 11, 2021

After a year of staying home, it’s no surprise that commercial real estate markets have felt the impact. This year’s outlook, however, depends on the type of real estate and the location.

That’s according to the National Association of Realtors (NAR), which hosted a Commercial Real Estate Forecast Summit on Wednesday and named Salt Lake City as one of the top 10 markets for commercial real estate this year.

The 10 markets selected have stronger economic and commercial conditions when compared with national averages and indicators. The trade group selected the top markets based on economic, demographic, housing and commercial market conditions in the multifamily, office, industrial, retail and hotel property sectors.

“The top commercial real estate markets that are expected to outperform the rest of the nation are generally affordable and able to draw new residents with a greater flexibility to work from home,” said Lawrence Yun, chief economist of the National Association of Realtors. “These growing markets also offer much lower office and retail rents and are, therefore, able to attract new and expanding businesses.”

The report says Salt Lake made the list because it has the lowest decline in nonfarm employment, which is down only a half percent. At 3.6%, it also had the lowest unemployment rate among the 52 markets studied, and job growth is stronger than the national pace.

“Commercial transactions are likely to pick up in the second half of 2021 and in 2022 as more people get vaccinated and more businesses open,” said the Commercial Real Estate Metro Market Report for Salt Lake City. “Higher fiscal spending and monetary accommodation will boost growth nationally and in the area.”

Here’s a look at what the report and economists say about each of the commercial sectors.

Multifamily

There is a strong demand for Salt Lake rental housing, and the market is experiencing faster rent growth than nationally. On average, households spend 31% of weekly wages on the typical apartment rent of $1,257.

“However, rent is still relatively cheaper than areas like San Jose ($2,129), San Francisco ($1,997) or Los Angeles ($1,840), so Salt Lake City has the potential to attract more movers, increasing the demand for housing,” the report said.

Salt Lake’s rental vacancy rate stands at 5.5% versus 6.5% nationally, according to the report.

“A recovering economy and the near certain job growth will steadily lead to the absorption of commercial properties,” said Yun, referring to the national market. “The apartment rentals market could once again experience very low vacancy rates by year’s end.”

Industrial

Among the top 10 markets, Salt Lake had the fourth-lowest industrial vacancy rate at 4.8%, and industrial space occupancy has increased in the past year.

“Multifamily and industrial remain the commercial market’s bright spots,” said Gary Cororaton, NAR’s senior economist and director of housing and commercial research, at the Forecast Summit. “With wide differences in commercial and apartment rents across metro areas, development will turn to less expensive markets that are closer to the gateway cities.”

Office

Salt Lake’s cost to rent office space is lower compared to other tech markets. For example, office asking rent is $25 per square foot in Salt Lake versus $50 per square foot in San Francisco.

Nationally, economists expect work-from-home habits will impact demand.

“Office vacancy rates will remain elevated, even with full office-job recovery by the middle of 2022, due to some shifting toward a nationwide work-from-home culture,” Cororaton said.

Retail

While many markets lost jobs in retail trade employment, Salt Lake actually had an 8.6% increase. That’s compared to a 2.2% decline for the U.S.

The report also notes Salt Lake has stronger consumer spending than the country as a whole.

Hotel/Lodging

Salt Lake City has a smaller share of leisure and hospitality jobs compared to the U.S. The report notes leisure and hospitality jobs have shrunk both in Salt Lake and in the U.S.

To learn more about commercial real estate, contact a Realtor specializing in commercial. Search for one here.