May 1, 2021 – The remarkable rise in homes sold and sale prices that we experienced in the latter half of 2020 continued unabated through the first quarter of 2021. Sale prices showed strong appreciation with increases in both average and median prices as well as dollar volume as reported by the Park City Board of REALTORS® Multiple Listing Service. Fears that the market might be overheated and that the boom could foretell another housing market balloon just before a crash to rival 2008 were quelled by consistent financial indicators pointing to a sustained bull market in housing. How is this market different from 2008?
· More stringent lending requirements – we learned our lesson from 2008 when banks were pushing exotic loan products to people who could not normally qualify for or afford them.
· Supply shortages keep prices higher – as opposed to 2008 when supply exploded as more people wanted to cash in on their newfound equity only to find themselves under water.
· Mortgage interest rates are low but not zero – among the exotic loans being offered before the last crash were super low interest, even negative amortization, zero down payments, and 110% of market value re-fi’s. None of those are prevalent now.
Optimism about the housing market closely parallels that toward the COVID-19 crisis. As more people are vaccinated and the restriction on gatherings starts to ease, more people are getting back to work and reestablishing their “normal” lives. Which means for many they are looking for new housing.
The pent-up demand that the isolation mandates created started to be released with full force and vigor. As buyers returned, competition for the limited number of available homes increased, and pending contracts far outstripped new listings coming to market. PCMLS recorded record low inventories in March and April and the numbers continue to decline during a spring market when one would expect more homes offered for sale, not fewer.
Some neighborhoods fared better than others in first quarter, but few had any negative results to report. Comparing the 12-months ending March 31, 2021 to the same period in 2020:
· Total New residential listings for the first quarter of this year were 786, up 17% from 673 in 2020.
· Pending sales grew even faster than new listings. PCMLS members signed 1,070 purchase contracts in Q1-2021, up from half that number (517) in Q1-2020. While more homes were coming to market, they were bought almost immediately creating the dramatic drop in inventory.
· Closed sales likewise were 150% higher. In Q1-21, 643 contracts settled versus 432 in Q1-20.
· With Pendings running much higher than New Listings, available inventory started to shrink dramatically. The quarter finished with just 651 residential and land units available for sale, nearly one-third of the inventory (1,909) on the same date in 2020.
How did the local market fare through the end of our first pandemic-riddled year? Here is our take on the total year-long results reported on a rolling year-over-year basis for the period ending March 31, 2021.
Single Family Homes:
· Within Park City Limits, total unit sales were up 38% over 2020 to 324 units while sales volume was up even more, $999 million, a 122% increase year-over-year.
· The median price of a single-family home across the city rose 38% to $2.7 million.
· In the popular Old Town area sales volume and units sold both doubled as the median price rose 11% over 2020 to $2.1 million.
· The Aerie neighborhood took the grand prize for greatest increase in median price, nearly doubling over the year earlier to $3.3 million.
· Snyderville residents saw a spike in sales volume (up 113%) while the median price tracked equally well, up 31% to $1.63 million.
· Promontory led the neighborhoods in sales units (153, up 113%) and dollar volume ($435M, up 165%) while Glenwild saw the biggest price increase with the median in that neighborhood passing $3.5M, up 56% year over year.
· The hotspots were south and east of the metro area. Jordanelle saw vigorous activity (sales units up 59%) that pushed the sales volume to nearly double 2020’s total to $256 million, up from $131 million the year earlier. Prices were particularly robust in the Sough Jordanelle area, where the median rose 19% to $2.8 million.
· Heber Valley saw a modest 8% rise in sales units, but 39% higher sales volume propelled by a median price that jumped 42% to $750,000.
· Other neighborhoods that saw year-over-year units sold or sales volume double this year were Lower Deer Valley, Canyons Village, Deer Mountain, Thanes Canyon, Old Ranch Road, Glenwild, Silver Creek Estates, and Heber East.
Despite fluctuations in the regional markets, Single Family sales activity on a region wide basis was markedly up compared to the year prior with unit sales up 38% and median prices up 47%.
· The Condo market in Old Town Park City continued to be solid with sales up (37%) in units on a comparable gain in median price of 13% to $675,000.
· Empire Pass was the standout neighborhood performer with sales nearly quadrupled driving the median price to $2.8 million, up 31%.
· For the second quarter in a row, Prospector unit sales dropped (10%) but sales volume grew (19%) as the median price popped 21% to $211,000.
· In the Snyderville area, Canyons Village saw its sales volume drop despite 13% more unit sales the result of the debut of a number moderately priced small condos that brought the median sale price down to $544,000.
· In Wasatch County, Jordanelle Park, Deer Mountain, Tuhaye, Hideout, and Red Ledges all saw gains of 50% or more in units sold with Red Ledges leading the price gain parade, up 33% to $875,000.
· The standout neighborhood outside of Park City Limits was Sun Peak/Bear Hollow where sales more than doubled and the median price jumped almost 50% from $515,000 to $751,000.
· Land sales exploded in first quarter as buyers who could not find an existing home to their liking elected instead to build their own.
· Sales units and dollar volume were both up triple digit percentages in all primary service areas including Park City limits, Snyderville Basin, Kamas Valley and Jordanelle.
· Overall land sales in Summit and Wasatch counties were up over 100%. The price increase expected when supply decreases and demand remain steady pushed the median sales price for land region wide was up 28% to $363,800.
· Four of the six major regions saw sales units doubling the previous year. Jordanelle led the way with 400 lots sold on a median price rise to $355,000 (up 23%).
· Jordanelle, Park City metro and Kamas Valley all saw a substantial increase in sales for 2021.
· Only 54 lots sold within the Park City Limits but the median price rose nicely by 19% to almost $1.28 million.
There’s no argument about the effect of the virus pandemic on the local tourism industry. Fortunately, the ski resorts had a very good season, not a record but restaurants and local shops were able to open and stay in business. Slopes were busy and restaurants have changed their table structure to accommodate social distancing. Now that spring is here, we’re seeing a jump in outdoor dining, with restaurants getting creative in maintaining social distances by installing “igloos” to isolate diners. All in all, the local market is faring much better than many places elsewhere in the country.
Other market factors:
· Part of the low inventory problem can be attributed to a lack of new housing starts, which can in turn be blamed at least partially on the skyrocketing cost of lumber. By some estimates, a new home now costs $38,872 more than it did just a year ago because lumber has jumped 250% in just the past year. The issue in lumber is manufacturers who curtailed output at the start of the pandemic thinking demand would drop. Just the opposite happened. Demand increased and they were not ready to meet it, so supply did not. Thus, higher prices.
· Even if we have lumber, we don’t have construction workers to build with it. Construction was hit hard by the pandemic, losing over 1 million jobs during 2020. Workers are coming back, but more slowly than demand would dictate. To recruit new construction workers, builders have had to increase their pay which in turn leads to higher housing costs as well. The circle continues.
· More than half of all Americans have now had at least one vaccination injection and by July we expect 75% to have been “jabbed” which will increase our optimism as well as our social activities, including touring open houses and setting up in person (good-bye Zoom) showings.
· Our low inventory problem should be easing as Sellers who have been slow to return to the market out of concerns about strangers touring their homes without sanitation awareness now welcome potential buyers.
· Continuing low inventory being chased by more and more buyers has pushed median sale prices higher, particularly in “outlying” areas such as Heber Valley, with single family homes appreciating 42% and condominiums 23% higher.
Before the celebration gets out of hand it is important to note that the pandemic has not subsided. As of this writing, Utah ranked 49th by percentage of residents immunized among all the states. Experts tend to agree that 75% or more of the population needs to get its shots before the holy grail of herd immunity can be reached. So, we have a long way to go. If restrictions on gatherings and mask wearing are relaxed too soon, we could see an escalating incidence of infections despite the speed with which the current administration is rolling out their inoculation program.
What do Park City agents see coming in the next three to six months? Here are a few observations and predictions from those with their fingers on the pulse of the market.
· The massive explosion in demand was fueled by migration trends caused by Covid, and so equally we should except a decline in buyer pressure as those Covid influences dissipate.
· “All real estate is local” has never been truer than now. Pricing, availability, and demand vary widely from neighborhood to neighborhood, reinforcing the need for a local Realtor to guide buyers through the jungle of competing bids and rising prices. This is particularly apparent in the Canyons base, where a large number of lower priced condos produced the appearance of a drop in average sale prices.
· Prices may not drop, but I do forecast a drop in demand which is currently way out of balance with 10 buyers to 1 seller.
· I see the market returning more to equilibrium. Nevertheless, one thing the Covid issue did do is expose Park City to yet more of the world, and so fundamentally, I see strong growth ahead. What Covid has shown is that Park City is clearly on the radar screen of market participants world-wide. That attraction bodes well for continued demand and interest
Technology advances and work-from-home opportunities expected to continue driving demand in areas further away from Park City proper. Sales of vacant lots in the Tuhaye/Hideout are nearly quadruple year-over-year and prices are 30% higher because of increased demand.
Real estate in the Wasatch back consists of highly segmented markets with nuances that vary significantly from one neighborhood to another and one house to another. Comparisons are hard to read on paper due to the unique features of individual properties, such as amenities, condition, style, location, age, view, and inventory. Buyers and Sellers are advised to contact a local Park City Board of REALTORS® Professional for the most accurate, detailed, and current information.