Even with a pandemic, Utah real estate is on track to have one of its best years ever. In fact, year-to-date home sales are currently 8% above last year’s record-breaking pace, and prices are up 10% statewide, according to October 2020 data from the Utah Association of Realtors.
Locally, year-to-date home sales are about 5% higher than last year in Davis County, while Weber County sales are up 7%. Morgan County shows an increase of 36% for the year so far. Prices are also up across Northern Utah, including a gain of 10% for Davis County, an increase of 11% for Weber County and 9% growth for Morgan County.
Many of the conditions that created this hot housing market are likely to continue into 2021. Let’s take a look at some of the key market indicators.
Home sales and prices
Demand for homes is likely to remain strong as people continue to move to Utah and as the state’s young population form households and buy their first homes. Utah’s position as second in the nation for job growth will also support home sales going into 2021.
In fact, a new consensus forecast from 23 top economists places Salt Lake City on its list of top prospective markets for 2021, according to the National Association of Realtors. The organization also lists another Utah market, Provo-Orem, as one of its “Top 10 Markets During and in a Post-COVID-19 Environment.”
Trends such as spending more time at home and remote work opportunities will also influence the real estate market in 2021 as would-be buyers look for houses that are better suited to their new lifestyle needs.
For the country as a whole, the National Association of Realtors expects a 9.5% increase in existing sales and a 23% rise in new home sales.
Even though home construction is likely to pick up next year, the housing shortage will continue to put upward pressure on home prices. The consensus forecast expects an 8% increase in prices in 2021 and a 5.5% gain in 2022.
Mortgage interest rates
While higher prices will dampen affordability, especially for first-time buyers, low mortgage interest rates will help soften the effect.
Economists say the Federal Reserve’s current policy of keeping rates low until inflation picks up will sustain mortgage rates over the next two years. The consensus forecast predicts the 30-year fixed-rate mortgage will average 3% in 2021 and 3.25% in 2022. A forecast from mortgage giant Freddie Mac also predicts 3% rates in 2021.
Some of the unknowns for next year will be the effect of President-elect Joe Biden’s housing policies.
For example, there has been a proposal for a $15,000 homebuyer tax credit, which could potentially help buyers with down payments; however, even with the program, the housing shortage will continue to keep some would-be buyers on the sidelines.
Some have also questioned whether the Biden administration would eliminate the 1031 exchange that real estate investors use. Because land owners often use 1031 exchanges, the National Association of Realtors says the removal of this provision could exacerbate the housing shortage.
The effect of additional pandemic stimulus programs is also unknown, including whether there will be additional mortgage relief for homeowners who are having trouble making payments. Should forbearance programs end, economists say the hot housing market would quickly absorb any potential foreclosures. Many foreclosures may also be avoided because homeowners have substantial equity in their homes.
As we look to next year, local conditions will play a significant role in how Northern Utah real estate performs. To learn more about the housing market conditions in your area, find a local Realtor at NWAOR.com.