Low interest rates, steady homebuyer demand and a shortage of homes for sale created a hot housing market for Northern Utah during the first half of 2021, with the median sales price rising more than 20% for counties in the area.
Fortunately, one economist says conditions are expected to get a little better for buyers during the second half of the year.
The Utah Association of Realtors June 2021 housing report found that the median price of homes sold increased 25% statewide in the January-June period compared to the same six months a year earlier.
Locally in Weber County, the median sales price rose nearly 29% for the first half of the year compared to the first six months of 2020. In Davis County, prices increased about 24%, and Morgan County had gains of nearly 59%. Similarly, the median price in Box Elder and Salt Lake counties increased about 21%.
With the inventory of active listings falling anywhere from 40% to 60% locally, the lack of available housing is the reason prices are spiking.
U.S. home prices are also rising at unprecedented rates for similar reasons.
“We have never seen price appreciation of this magnitude,” said Lawrence Yun, chief economist of the National Association of Realtors, in a video about May U.S. existing home sales. He says the 24% year-over-year price appreciation in May is the “strongest ever.”
“The home prices are continuing to hit record levels,” Yun said. “Now with prices rising so much, it’s beginning to squeeze away some buyers.”
In fact, a Utah family making the median income only has 85% of what it needs to purchase the median-priced home at prevailing interest rates, according to the Utah Association of Realtors. That’s down from 109% last year.
These affordability challenges have hindered some buyers. For the first half of the year, Weber County home sales declined 11% compared to the same period a year earlier. Sales also fell about 13% in Davis County, about 47% in Morgan County and 2.5% in Box Elder County. Salt Lake County sales increased 4.5%.
A lack of available housing, especially at price points under $300,000, has also held back U.S. sales.
“The sales activity is clearly being hurt due to the affordability challenges and also the lack of inventory at the affordable price points,” Yun said.
Nevertheless, there are hopeful signs for would-be homebuyers, including Yun’s prediction that competition will not be as intense during the second half of the year.
“Given that the sales activity is coming down, we may be sensing some turn in the market,” Yun said. “We are seeing less prevalence of multiple offers.”
Yun is quick to point out, however, that there’s no doubt the market still favors sellers.
“It’s still a seller’s market, but people need to be very cautious about how they price their home to attract buyers knowing that the sales activities are declining somewhat,” Yun said.
Yun expects more inventory to come onto the market, making conditions calmer throughout the remainder of the year. In fact, Utah has already set a record in the first quarter for permitted residential units, according to the Ivory-Boyer Construction Report.
“It will still be a seller’s market, and first-time buyers will face some challenges on affordability product,” Yun said. “But calming of the market and less need for hurried decisions should be a welcoming trend.”
For more information about specific real estate trends in your own neighborhood, contact a local Realtor. Find a directory of Northern Wasatch Realtors at NWAOR.com.
Shauna Ray is president of the Northern Wasatch Association of Realtors.