Buyers • October 10, 2021

What is a Buyer’s Market?

by Gary Peterson

A home buyer searches for listings on their laptop as images of houses float above their hands.

Much can be determined about the conditions of a local real estate market by its supply and demand. When the supply of available homes is greater than demand, it’s referred to as a buyer’s market. Reduced listing prices, longer days on market, and an increased number of re-listings are also signs of a buyer’s market. While the current market is far from favoring buyers, it’s still a good idea to understand how a shift in the conditions could impact your search for a new home when the time comes.

What is a Buyer’s Market?

A buyer’s market creates ideal conditions for those looking to purchase a home. With more homes on the market than buyers, sellers must compete to gain their attention. In a buyer’s market, inventory is high, which means buyers can take their time in finding the right home as there is simply more to choose from. It’s common for homes to be on the market for longer periods of time. Sellers will sometimes need to drop their price to gain a competitive advantage, a selling tactic that is not nearly as common in hotter markets. To get a gauge of your local market conditions, talk to your Windermere agent about the current home price, sales, and inventory figures in your area.

How to Approach a Buyer’s Market

It’s understood that a buyer’s market favors buyers, but how can they utilize this advantage as they explore available listings? For one, buyers can be picky about finding the right home. Unlike a seller’s market, buyers have the luxury of weighing comparative advantages between homes knowing that time is on their side.

The conditions of a buyer’s market favor the buyer when it comes to negotiations as well. With fewer people buying homes, sellers are willing to be more flexible during the negotiation process, which gives buyers leverage. This underlines the benefits of working with a buyer’s agent. Buyer’s agents deliver significant value to the clients they represent in their ability to find the right home, streamline the buying process, and handle the negotiations and offer phases of a home purchase.

If you are selling a home while looking to purchase, you likely have the opportunity to make your offer contingent on the sale of your existing home, whereas in a seller’s market, there is a low chance of getting a contingent offer accepted. Contingent offers can be tricky, but when done correctly, it means that you don’t have to buy if you can’t sell.

When an agent sees that a home has been on the market for quite some time, that will fuel their ability to negotiate a lower price. In these market conditions, the chances are low that buyers will enter a bidding war or that a home will suddenly sell overnight to a competing offer. However, once buyers have identified their top candidate home, they should work with their agent to form a strategy for making a successful offer.

Sellers will be doing the most they can to make their homes stand out amongst the high number of available listings. It’s common for them to make repairs, upgrades, and other improvements to their homes before placing them on the market to entice buyers. Accordingly, a buyer’s leverage in negotiations carries through to contingencies, where they can work with their agent to negotiate repairs—a proposition that sellers will be more open to, given the limited number of buyers.

The conditions of a buyer’s market put the buyer in a favorable position as they go about finding the right home. For more information on how to increase your buying power, give me a call.

Market Updates • Matthew Gardner • October 3, 2021

9/27/2021 Housing and Economic Update from Matthew Gardner

by Gary Peterson

This video is the latest in our Monday with Matthew series with Windermere Chief Economist Matthew Gardner. Each month, he analyzes the most up-to-date U.S. housing data to keep you well-informed about what’s going on in the real estate market.

Hello there! I’m Windermere Real Estate’s Chief Economist, Matthew Gardner, and welcome to the latest episode of Mondays with Matthew.

Today we are going to take a look at the latest Home Purchase Sentiment Index survey that was just put out by Fannie Mae. And for those of you who may not be familiar with this survey, it’s actually pretty important and one that I track closely as it’s the only national, monthly, survey of consumers that’s focused primarily on housing.

The survey shows the responses of 1,000 consumers across the country to roughly 100 survey questions on a wide range of housing-related topics. Now, don’t worry, we aren’t going to look at all 100 questions – just the ones that solicit consumers’ evaluations of housing market conditions and that also address topics related to their home purchase decisions.

So, as you can see here, the overall index was trending higher pretty consistently until the pandemic happened which had massive, but temporary, impacts. And looking the last 3-years, you can get a better idea as to the speed of the pandemic induced drop – pretty remarkable.

Now, you will also see that the index recovered quite quickly; however, it fell again last fall as the pandemic was not going away at the speed many had hoped for – it rose again this spring but has been pulling back for the past few months but, that said, the August index level essentially matched the level seen in July.

Now let’s look at the questions that are used to create of the index number and how consumers responded.

When asked whether it was a good time to buy a home, the percentage who agreed with that statement rose from 28 to 32%, while the share who thought that it is a bad time to buy dropped from 66 to 63%. And, as a result, the net share of those who say it is a good time to buy jumped 7 points month over month and its notable that this is the first time the net share number has improved in the past 4-months.

What I see here is that – although improving modestly, the general consensus is that it is not a good time to buy and that sentiment is being driven by two things: One – there are still not enough homes on the market, and two, rapidly rising prices are scaring some people.

And when asked if they thought it was a good time to sell their homes it was interesting to see that share drop from 75 to 73% while the percentage who said that it’s a bad time to sell dropped 1 point to 19% and as a result, the net share of those who said it was a good time to sell pulled back by 1% but it still indicates that more owners think that it is a good time to sell than don’t.

Looking now at the direction of home prices over the next 12-months, the percentage who think that home prices will rise fell from 46 to 40%, while the percentage who expected home prices to drop rose from 21 to 24%.

As a result, the net share of Americans who say home prices will go up dropped by 9 points – from 25%, down to 16%.

Although this may sound concerning, I should add that the share of respondents who thought that home prices will remain static over the next year rose from 27% to 31%.

On the financing side, the share who think mortgage rates will rise over the next 12 months dropped from 57 to 53%, while the percentage who believed rates would be lower rose from 5% to 6% and, as a result, the net share of Americans who believed that mortgage rates will go down over the next 12 months rose by 5%, and with 35% of respondents thinking that that rates will hold steady – it’s clear to me that a vast majority are not worried about mortgage rates rising.

The takeaways for me so far are that consumers tempered both their recent pessimism about homebuying conditions and their upward expectations of home price growth.

Most notably, a greater share of consumers believe that it’s a good time to buy a home – though that population remains firmly in the minority at only 32% – while the ongoing plurality of respondents who expect home prices to go up over the next 12 months dropped but was still well above the 24% of consumers who believe home prices will fall.

Now, there are two more questions that are worth looking at which aren’t directly related to home buyers and sellers but are still important as they look at employment and incomes.

The percentage of respondents who said that they are not concerned about losing their job in the next 12 months remains very high at 82%, but it did drop by 2 points month-over-month, while the percentage who said that they are concerned ticked up to 15% from 13%. As a result, the net share of Americans who say they are not concerned about losing their job fell by 4 percentage points month over month, but remains well above the level seen a year ago.

And finally, when households were asked about their own personal finances, the percentage of respondents who said that their household income is significantly higher now than it was 12 months ago pulled back one point to 26%, while the percentage who said that their household income is significantly lower dropped to 12%.

As a result, the net share of those who said that their household income is significantly higher than it was a year ago rose by 1 percent month over month and came in 5 points higher than a year ago. It’s also worthwhile noting that most said that their household income is about the same as it was a year ago with that share rising from 56 all the way up to 59%.

Looking at all the numbers in aggregate, the index level was relatively flat in August with three of the index’s six components rising month over month, while the other three fell, and that tells me that the continued strength of demand for housing and definitely favorable conditions for home sellers may well be offsetting broader concerns about the Delta variant of COVID-19 as well as rising inflation that have both negatively impacted other consumer confidence indices.

Most consumers continued to report that it’s a good time to sell a home – but a bad time to buy – and they most frequently cite high home prices and a lack of supply as their primary rationale.

However, the ‘good time to buy’ component, while still near a survey low, did tick up for the first time since March, perhaps owing in part to the very favorable mortgage rate environment as well as growing expectations that home price appreciation will begin to moderate over the next year. A sentiment that I personally agree with.

Well, I hope that you have found this month’s discussion to be interesting. As always if you have any questions or comments about this topic, please do reach out to me but, in the meantime, stay safe out there and I look forward the visiting with you all again, next month.

Selling • September 13, 2021

The Difference Between a Comparative Market Analysis and an Appraisal

by Gary Peterson

A real estate agent goes through paperwork with a man and a woman.

It can be difficult for sellers to distinguish between two methods of finding the value of their home: a Comparative Market Analysis (CMA) and a home appraisal. Though they share many similarities, there are key differences in how the two approaches ultimately arrive at a listing price for your home.

The Difference Between a Comparative Market Analysis and an Appraisal

Comparative Market Analysis (CMA)

A CMA is conducted by an agent using their knowledge of the local market in conjunction with information available to them on the multiple listing service (MLS), which contains data on sold homes and market trends. A CMA helps to price the home more accurately, keeping the property competitive in the current market. For those who are thinking of selling their home For Sale By Owner (FSBO), it’s worth noting that you will not be able to conduct a CMA on your own, since, among other things, access to the MLS is exclusive to real estate agents.

Your agent’s analysis accounts for the various factors that influence home prices to arrive at an accurate estimate of your home’s value. A CMA compares your home to others in your area that have either recently sold, are currently on the market, or had previously listed but have since expired, typically using data from the past three-to-six months. Comparable homes, or “comps,” are homes whose characteristics are similar to your own, such as the housing type, condition, and the square footage and property size. A thorough CMA will provide information on what homes in your area are selling for, how long they were on the market, and the difference between their listing and sold price, and will list a low, median, and high selling price for your home.

Appraisal

The main difference between an appraisal and a CMA is the personnel involved. Whereas a CMA is conducted by a real estate agent, an appraisal is carried out by a licensed appraiser on behalf of the bank. Once a buyer applies for a loan to purchase your home, the bank will order an appraisal of the property. Though appraisers use methods of comparison similar to an agent’s CMA, unlike a real estate agent, bank appraisers have no vested interest in the sale of the home. The goal of an appraiser’s visit is to determine your home’s fair market value to ensure that the bank isn’t lending more money to the buyer than needed.

Market Updates • Matthew Gardner • Park City • September 1, 2021

Q2 2021 Park City, Utah Real Estate Market Update

by Gary Peterson

Q2 2021 Park City, Utah Real Estate Market Trends

The following analysis of select neighborhoods in the Park City real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.

REGIONAL ECONOMIC OVERVIEW

Utah’s impressive post-COVID job recovery continues unabated. In the first quarter Gardner Report, I reported that the state had not only recovered all the jobs that were lost due to the pandemic, but employment was continuing to rise. This trend has continued. With 96,400 jobs added over the past year and 14,500 over the past quarter, total employment is now 26,900 jobs higher than the pre-pandemic peak. The only other state in the country that has recovered all the jobs lost due to COVID is Idaho. With a full recovery in the job market, it’s no surprise the jobless rate dropped further to 2.7% in June—its lowest level since March 2020 and the second-lowest rate in the nation; only Nebraska is lower at 2.5%.

PARK CITY, UTAH HOME SALES

❱ In the second quarter of 2021, 76 homes were sold in Park City, more than doubling the total number of sales in the same quarter a year ago, but down 12.6% from the first quarter of this year.

❱ Sales rose in all but two markets and doubled in seven of them. However, I would note that the pandemic was gripping the nation last summer, which clearly impacted sales and skewed growth-rate data.

❱ Although the number of homes for sale rose 12.3% from the first quarter, inventory levels were 47% lower than a year ago, which is impacting sales. I would like to see more homes come to market in the second half of the year, but I am not sure that will be the case.

❱ Pending home sales were 22.6% higher than a year ago, but down 28.3% from the first quarter of 2021 due to persistent supply limitations.

A bar graph showing the annual change in home sales for various areas in Park City, Utah.

PARK CITY, UTAH HOME PRICES

❱ The average home price in Park City rose 53.9% year over year to $2.347 million, but prices were 12.2% lower than in the previous quarter.

❱ Only one neighborhood—Kamas & Marion— saw average sale prices below $1 million. The most expensive home sales were again in the Canyons & The Colony, where the average price came in at $10.89 million.

❱ Prices rose in all neighborhoods other than Canyons & The Colony. Because there were no sales reported there a year ago, I cannot make a comparison. All other areas saw double-digit increases.

❱ Of note is that four neighborhoods saw average prices breach the $1 million mark in second quarter. These were Heber, Midway, Summit Park, and Wanship/Hoytsville/Coalville/Rockport.

A bar graph showing the annual change in home sale prices for various areas in Park City, Utah.

DAYS ON MARKET

❱ The average time it took to sell a home in the Park City area dropped 46 days compared to the second quarter of 2020.

❱ The amount of time it took to sell a home dropped in ten neighborhoods relative to the second quarter of last year and was down in six areas compared to the previous quarter.

❱ In the second quarter, it took an average of only 13 days to sell a home. Homes sold fastest in the Wanship/Hoytsville/Coalville/Rockport, Pinebrook, and Jeremy Ranch neighborhoods, and slowest in the Canyons & The Colony neighborhoods.

❱ The significant drop in market time can again be attributed, at least in part, to the ongoing impact of the local listing service instituting a rule that new construction developments add sales “en-masse.”

A bar graph showing the average days on market for homes in various areas of Park City, Utah.

CONCLUSIONS

A speedometer graph indicating a seller's market in the Park City, Utah area.

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

Compared to most of the country, Utah’s economy is flourishing, and this is undoubtedly influencing expensive markets like Park City. Financing costs remain very competitive, which is driving demand as supply levels remain very low. I doubt there will be enough improvement to the number of homes for sale to meet buyer demand, which will continue to cause prices to rise at a very significant pace.

Given all these factors, sellers continue to control the market, and I am therefore moving the needle more in their favor.

ABOUT MATTHEW GARDNER

Matthew Gardner - Chief Economist for Windermere Real Estate

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.

Buyers • September 1, 2021

Buying and Selling a Home at the Same Time

by Gary Peterson

An elderly man and woman hold the keys to their new home.

Successfully selling a home and buying a home are significant accomplishments on their own, but when their timelines cross it can be difficult to manage both. If you’re thinking about doing both simultaneously, it’s equally important to understand the steps you can take to make the process go smoothly as it is to have a backup plan in case it doesn’t. Above all, the balancing act required to pull off both deals highlights the importance of working closely with a trusted and experienced real estate agent.

Do I buy or sell first?

One can imagine a perfect world in which the two transactions go through one right after the other. However, this is not usually the case. So, should you list your current home first or start by putting in offers on a new one? There are pros and cons to both.

Selling your current home first allows you to make offers on a new home with cash in your pocket, increases your buying power, and avoids having to juggle two mortgages simultaneously. On the other hand, it creates a gap of residence, often leaving homeowners wondering where they’ll stay until they move into their new home or whether they may need to rent before they can buy again. Sellers may also negotiate a rent-back agreement with the buyers, allowing them to rent the house from the new owners before they move in.

Buying before selling solves the need for any temporary housing and makes the overall moving process much easier. Having a residence established ahead of time means you’ll only have to move once, which can save you some serious stress during this time of transition. Oppositely, buying a new home before you sell your current one will put an added strain on your finances. Having two concurrent mortgages equates to taking on more debt, which could result in less-than-favorable loan terms for purchasing your new home. Without the lump sum generated by a home sale in your pocket, coming up with enough money for a down payment may be a challenge and obtaining private mortgage insurance (PMI) may be in the cards. Finally, buying before selling comes with an obvious assumption—that your current house will sell.

Ultimately, the order of operations depends on your situation. Perhaps you’re moving due to a change of employment, and you need to direct all your energy toward buying a new home by a certain date before you can even think about selling your current one. No matter which route you take, it’s important to communicate your timeline to your listing agent or your buyer’s agent so they can strategize accordingly.

Buying and Selling a Home at the Same Time

Local Market Conditions

Buying and selling at the same time will come with a certain duality: at each step in the process, you’ll have to balance your responsibilities as both a buyer and a seller. For example, when assessing your local market conditions, you’ll be looking at not one, but two housing markets.

Seller’s Market: Selling in a seller’s market means that that you’ll need to be prepared to move once you list, since you could be looking at a short selling timeline. However, relying too heavily on the assumption that your house will sell quickly could make things dicey down the road. If you’re buying in a seller’s market, finding a new home may take longer than expected. You could potentially be waiting weeks or months for an offer to get accepted.
Buyer’s Market: Selling in a buyer’s market typically means that homes stay on the market longer. If you proceed with a new home purchase just after you’ve listed your current house, know that it may take a while to sell. If you’re buying in a buyer’s market you can afford to be picky, knowing that time is on your side. With fewer people buying homes, sellers will be more flexible, giving you leverage to negotiate your contingencies.

Having a Backup Plan

If only you could wave a magic wand and make both transactions go through as planned. That’s why it’s important to have a backup plan in place to right the ship should things go sideways at any point in the buying or selling process. Talk to your agent about which options may be right for you. Here are a few:

Sales Contingency: Buying your new home with a sales contingency allows you to opt out of the purchase contract if your home doesn’t sell by a specified date. Purchasing contingent on the sale is rare in highly competitive markets.
Bridge Loan: If your current home hasn’t sold yet and you’re not able to afford the down payment on a new home, a bridge loan may be a fitting solution. Bridge loans can be used to cover the down payment on a new house and are repaid once your existing home has sold.
Rent-Back Agreement: A rent-back agreement is a clause in the sales contract that allows the seller to rent their old home from the buyer for an agreed-upon period of time before the buyer moves in. This can be especially helpful in situations when the seller is having trouble finding a new home.

For more information on buying and selling a home at the same time give me a call!

Buyers • Market Updates • Matthew Gardner • Selling • September 1, 2021

Q2 2021 Utah Real Estate Market Update

by Gary Peterson

The following analysis of select counties of the Utah real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.

REGIONAL ECONOMIC OVERVIEW

UTAH HOME SALES

❱ In the second quarter of 2021, 9,689 homes sold, representing a modest 1.2% increase year over year, and a very significant 42% increase compared to the first quarter of the year.

❱ Sales activity rose in four counties but dropped in three. Summit County saw a massive increase in sales. Wasatch County also saw impressive gains. Sales dropped most in Morgan County, but because this is a very small market I’m not concerned.

❱ What aided the jump in sales from the first quarter was an increase in listing activity. Inventory of available homes rose more than 50% compared to the first quarter. Although this is good news, listing activity is still down more than 55% from this time a year ago.

❱ Pending sales rose across the board compared to the first quarter, with significant increases in Utah, Davis, Salt Lake, and Wasatch counties. With pending sales up more than 30% from the prior quarter, there will likely be solid growth in closed sales in the upcoming quarter.

A bar graph showing the annual change in home sales for various counties in Utah.

UTAH HOME PRICES

A map showing the real estate market percentage changes for various counties in Utah.

❱ A rock-solid economy and low mortgage rates had buyers out in force. That said, even with supply levels improving, demand is still outpacing supply, which has led to significant price gains. Year over year, the average home price in the region rose 41.8% to $578,648. Prices were 8% higher than in the first quarter of 2021.

❱ Although the data shows remarkable home price growth, the pandemic had a significant impact on housing during the second quarter of last year. As such, I anticipate the yearly change in prices will soften in the third quarter but remain well above the long-term average.

❱ Home price growth was led by Wasatch County, but rose by very significant rates across all the counties contained in this report. Of note is that Summit and Wasatch counties saw average sale prices above the $1 million level in the second quarter.

❱ The takeaway here is that, while the number of homes on the market did improve relative to the previous quarter, there continues to be a shortfall in inventory, which has led prices to rise at a significant pace.

A bar graph showing the annual change in home sale prices for various counties in Utah.

DAYS ON MARKET

❱ The average number of days it took to sell a home in the counties covered by this report dropped 28 days compared to the second quarter of 2020.

❱ Homes sold fastest in Davis County, with sales occurring in less than two weeks in an additional four counties. The greatest drop in market time was in Summit County, where it took 63 fewer days to sell a home than it did a year ago.

❱ During the second quarter, it took an average of only 19 days to sell a home in the region, which is down 14 days compared to the first quarter of this year.

❱ Days-on-market data provided further proof of the supply/demand imbalance mentioned throughout this report. Unfortunately, I do not see any signs of supply levels rising enough to meet buyer demand.

A bar graph showing the average days on market for homes in various counties in Utah.

CONCLUSIONS

A speedometer graph indicating a seller's market in Utah.

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

Strong economic growth—in concert with persistently low mortgage rates—continues to drive housing demand. Even with the increase in listings in the second quarter, many buyers are frustrated by the level of competition for the homes that are for sale.

It remains, undeniably, a seller’s market, and I have therefore moved the needle a little more in their favor.

ABOUT MATTHEW GARDNER

Matthew Gardner - Chief Economist for Windermere Real Estate

Market Updates • Matthew Gardner • June 9, 2021

Matthew Gardner: What You Should Know About Today’s Real Estate Market

by Gary Peterson

by Matthew Gardner

Understanding the housing market is a matter of analyzing its many data sets. In a recent piece for Inman News, Windermere Chief Economist Matthew Gardner offered his perspective on recent U.S. pending sales, new-home sales, and existing-home sales figures.

If you’re involved in the housing market, and I assume that most of you are, you know very well that this is a numbers business. All of us are surrounded by housing-related data day in and day out, and it can become a little overwhelming at times — even for an economist like myself.

Well, today I’d like to take a few minutes to talk about just a couple of the datasets that I think are particularly important to track and offer you my perspectives on them.

Housing

There’s no doubt that the ownership housing market really was a beacon of light as we moved through the pandemic period. Even though the market paused last spring as COVID-19 hit the nation, it snapped back remarkably quickly, unlike many other parts of the U.S. economy that are still suffering today.

This is important, as housing is a significant contributor to the broader economy. For example, last year, spending on the construction of new homes, residential remodeling and real estate brokers fees amounted to around $885 billion or 4.2 percent of gross domestic product.

But the real number is far greater than that when you add in all spending on all household services. The total amount of money spent on housing in aggregate was around $3.7 trillion or 17.5 percent of the country’s economy.

So, we know that the housing market is a very important part of our economy, but can that number continue to grow? Let’s take a look.

Inventory

The chart below shows the number of single-family homes for sale going back to 1983. As you can clearly see, there’s never been a time — at least since records were kept at the national level — where they were fewer homes for sale at any one time.

Line graph titled “inventory of homes for sale” along the x axis are the Months starting with January 1983 and ending with August 2020. On the y axis is 0 through 4. The line shows that in August 2020 there are fewer homes on the market than ever before. Source is NAR with Windermere Economics seasonal adjustments.

And this is a problem because the biggest issue the market faces today is that demand for homes is far exceeding supply.

A report I track very carefully — and I am sure that many of you do, too — is the National Association of Realtors pending home sales index, which is shown below.

Although it’s not a perfect indicator, as the survey only covers about 20 percent of all homes that go pending, it does give us a pretty good idea as to what the future may hold given that, all things being equal, about 80 percent of pending homes close within roughly two months, making it a leading indicator.

You can clearly see the massive pull back last spring because of the pandemic, but this was very quickly followed by a very significant surge.

It pulled back again last winter, but I would suggest that this was more a function of lack of homes for sale than anything else. However, look at the March spike.

Now, you might be thinking that this is a great number, but I would caution all of you not to pay too much attention to year-over-year changes, as they can be deceiving. You see, the index jumped because it was being compared with last March when the pandemic really started.

Closed sales

When we look at closed sales activity, it actually lines up pretty well with the pending home sales index, which fell in January and February. This is reflected in the contraction in closed sales that we saw this spring. And if the index is accurate, it suggests we may see closed sales activity pick up again over the next couple of months.

Line graph titled “Existing Home Sales” in millions seasonally adjusted. Along the x axis is months from January 2021 and April 2021. On the Y axis is numbers between 3.0 and 7.0, increasing by half points. The line shows a sharp decrease in April 2020 and a quick recover with a peak at 6.7 in October 2020. Source is NAR.

Of course, any time where housing demand exceeds supply, there is a solution — and that would be to build more homes.

But as you can see here, though more homes started to be built as we emerged from the financial crisis, the number today is essentially the same as it was two decades ago and has been declining for the past two years.

That’s significant, as the country has added over 12 million new households during the same period which has further fueled demand for housing. If there are no new homes to buy, well, that does one thing — and that’s to put more focus on the resale market, which has already led to very significant price increases.

New home market

But this particular report also offers some additional data sets, which I think give more clarity to the state of the new home market.

Before the housing market crashed, you can see that a majority of new homes that were on the market for sale were being built at that time, but — as the housing bubble was bursting — the market dropped, and the share of homes that were finished and for sale naturally rose.

But what I want you to look at is the far right of the chart above. You see the spike in the share of homes for sale that have not yet been started?

Well, given the massive increase in construction costs builders have, understandably, become far more cautious and are trying to sell more homes before they start to build them to mitigate some of the risk. It also tells me that they see demand that is not being met by the existing-home market and are looking to take it advantage of this.

When we look at new home sales, you can see that the trend, in essence, follows the number of homes for sale, but I would caution you on a couple of things.

Firstly, these figures do not represent closed sales, as the Census Bureau, which prepares this dataset, considers a home sold once it has gone under contract. This makes sense, as a home can be sold before it has even broken ground. In essence, it’s more similar to NAR’s Pending Home Sales Index than anything else.

Look now at sales by stage of construction on the right. You can see that, as the pandemic was getting started, new homes that were ready to move into were what buyers wanted, and that accounted for over 42 percent of total new sales in April.

As the supply of finished homes dropped, homes that were being built took the lion’s share of sales — as they have done historically. However, look at April. The greatest share of sales — 37.7 percent — were homes that hadn’t yet been started.

Again, this supports the theory that builders remain cautious given ever-escalating costs, but it also shows that buyers’ needs are not being met by the resale market, so they were willing to wait, likely a considerable time, for their new home to be built.

Of course, the couple of datasets I’ve shared with you today are just the tip of the iceberg when it comes to the housing-related numbers you should all be tracking, as they can tell a story that can impact everyone involved in the development or sale of homes.

Mortgage rates

In addition to the data we have discussed today, you should be well versed in mortgage rate trends, demographic shifts, building permit activity and the economy in general — and you need to understand all these numbers at a local as well as national level.

For the vast majority of households, buying a home will be the most expensive thing that they will ever purchase in their lives. And given memories of the housing crash, as well as the significant increase in home prices that we’ve seen since last summer, it’s now more important than ever for you to be able to share your knowledge with your clients and be able to advise them accordingly.

Windermere’s Chief Economist, Matthew Gardner, often contributes to local and national publications with his insights to the housing market. Recently he offered his analysis of home sales numbers to Inman News, this is a repost of that video and article.

For more market news and updates from Matthew Gardner,

visit our Market Update page.

Market Updates • May 4, 2021

Q1 2021 Utah Real Estate Market Update

by Gary Peterson

REGIONAL ECONOMIC OVERVIEW

Much like the rest of the nation, COVID-19 had a very significant impact on employment levels in Utah; the state shed 140,000 jobs in only two months. However, I am delighted to report that—as of the end of the first quarter—the region has not only recovered all of the jobs that were lost, but employment levels are now 11,300 jobs higher than the pre-pandemic peak in February 2020. With the recovery complete, at least for the time being, the unemployment rate continues to drop and is currently only 2.9%. At this level, Utah—along with Nebraska, South Dakota, and Vermont—now has the lowest jobless rates of any states in the Union.

UTAH HOME SALES

❱ In the opening quarter of 2021, 6,822 home sales occurred, representing a drop of 4.6% compared to the same period in 2020 and 33.4% lower than the fourth quarter of last year.

❱ Total sales activity rose in Summit, Wasatch, and Salt Lake counties, but fell across the balance of the market covered in this report.

❱ I am not concerned about the lower level of home sales as the cause is directly linked to a shortage of inventory. The average number of listings in the quarter was down 66.8% compared to a year ago and down 35.1% compared to the fourth quarter of 2020.

❱ With such low levels of inventory, it wasn’t surprising that pending sales were down 8.8% compared to the fourth quarter of 2020. This suggests that, unless we see a significant number of homes come online as the spring ends, closings in the second quarter may also be lower.

A bar graph showing the annual change in home sales for various counties in Utah.

UTAH HOME PRICES

A map showing the real estate market percentage changes in various counties in Utah.

❱ With far more demand than supply, it wasn’t surprising that home prices continued to trend significantly higher. Year over year, the average home price in the region was up 32.6% to $536,024. Home prices were also 4.5% higher than in the fourth quarter of 2020.

❱ When compared to the fourth quarter of last year every county, other than Wasatch (+.7%), experienced very solid price growth.

❱ Price growth was influenced by very significant gains in Morgan and Summit counties, but double-digit increases were seen across the board.

❱ The economics of supply and demand are clearly impacting home values in the region. The question will be how long this pace of growth can continue. The market needs more supply; without it, affordability will continue to drop.

A bar graph showing the annual change in home sale prices for various counties in Utah.

DAYS ON MARKET

❱ The average number of days it took to sell a home in the counties covered by this report dropped 27 days compared to the first quarter of 2020.

❱ Homes sold fastest in Davis, Utah, and Weber counties. The longest time it took to sell a home was again in Summit County. Unsurprisingly, it took less time to sell a home in all markets than it did a year ago.

❱ During first quarter, it took an average of 33 days to sell a home in the region, down 1 day compared to the fourth quarter of last year.

❱ As suggested earlier in this report, the market is in a state of imbalance, with far more buyers than sellers. As frustrating for buyers as this is, I am afraid that I do not see it changing in the near-term.

A bar graph showing the average days on market for homes in various counties in Utah.

CONCLUSIONS

A speedometer graph indicating a seller's market in Utah.

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

An economy that has recovered from the COVID-19- induced decline, combined with historically low levels of inventory, have provided a “perfect storm” that continues to benefit sellers.

I was hoping that the spring would see more sellers put their homes on the market, but that has not yet happened. Concerns about listing before everyone is vaccinated, as well as sellers who are likely waiting until they find a home to buy, are keeping many of them sidelined. This has certainly benefitted those who did decide to sell, and it remains a market that heavily favors sellers. As such, I am moving the needle a little more in their favor.

ABOUT MATTHEW GARDNER

Matthew Gardner - Chief Economist for Windermere Real Estate

Design • April 22, 2021

Ideas for Decorating with Plants

by Gary Peterson

At the mention of interior design, the first things that often come to mind are furniture, wall art, paint colors, and other material components. However, plants are an important décor element that have the power to refresh the look and feel of any indoor space, while making your home eco-friendlier. Keep the following tips in mind when decorating your home with plants.

Consider Your Space

Before you make a trip to the nursery, think about which spaces in your home are best suited for plants. It’s also important to research the needs of the plant varieties you’re considering. By knowing how much shade and direct sunlight they need, you’ll be able to identify the best home for each plant type and the care they need to grow.

Go Vertical

Empty vertical wall spaces provide the perfect opportunity to incorporate hanging plants. Whether you use planters or install shelving, hanging plants attract the eye and bring an organic, living element to what was previously a blank canvas. Hanging herb gardens are a wonderful addition to the kitchen, allowing you to keep fresh ingredients and flavors out in the open air and within reach at all times.

Floor Plants

Floor plants are typically large and require plenty of space. Due to their size, they are often used to balance the proportion of rooms containing large furniture items like couches, desks, and tables. Common floor plants include the fishtail palm, olive trees, the rubber plant, fiddle leaf fig, and bird of paradise.

Low Maintenance Plants

For those who don’t consider themselves to be green thumbs, cacti and succulents are the way to go. Most succulents come from hot climates with little humidity and have thick tissue that stores water for long periods. Accordingly, they are lower maintenance than most other plants and require little watering.

Decorate with Terrariums

Another creative, relatively low-maintenance option for indoor gardeners is a terrarium. Terrariums are contained indoor gardens, usually in a glass container that can be left either sealed or open. Closed terrariums are self-nourishing, creating their own water cycle. Plants that grow in humid conditions are best suited for this environment. Open terrariums provide a good home for plants that need less water, like cacti and succulents. Terrariums make for eye-catching décor, with styles ranging from minimalistic to intricate.

For more information on home design and the latest trends, check out our tips on how to upgrade your bedroom, home office, and kitchen, as well as the 2021 paint color trends and principles of timeless home design.

Selling • April 22, 2021

Knowing When to Sell Your Home

by Gary Peterson

Of all the components involved in a successful home sale, there is perhaps no greater contributing factor than timing. Knowing when to sell your house gives you the best chance to make an impact when you hit the market. Every seller’s situation is unique but choosing when to sell comes down to how prepared you are, finding the right agent, and local market conditions. Once you’ve got a grasp of these elements, then you can decide if it’s the right time to sell.

Are You Ready to Sell?

Before you sell your home, your finances must be in order. Equity is a natural starting point for assessing your financial health. To calculate your equity, you’ll need to know your home’s market value. Your real estate agent can help you determine this by conducting a comparative market analysis (CMA), which involves comparing your home to others in your area by such characteristics as square footage, the number of bedrooms/bathrooms, age, and lot size. Once you know your home’s market value, subtract your current mortgage balance from that number and you’ll have your current home equity. If your equity is negative, then it may not be the best time to sell.

Beyond your home equity, there are plenty of other financial factors to consider when preparing to sell. Selling a home does not come without its own set of costs. Commission fees, home repairs, inspections, and staging are just some of the expenses you can expect to incur. For more information on the costs involved with selling your home, talk to your Windermere agent.

Selling a home is an emotional process that comes with significant lifestyle changes, so it’s important to make sure it’s the right time for you and everyone in your household. Part of a real estate agent’s’ role is understanding how the varying emotions of the selling process apply to different people. For every fear, worry, and hesitancy you may experience when trying to decide if it’s the right time to sell, your agent can share similar experiences while working with past clients.

Local Market Conditions

The state of the real estate market in your area could dictate whether it’s the right time to sell. Various factors affect local market conditions like inventory, seasonality, mortgage rates, and home price growth. Talk to your real estate agent about what the local conditions mean for your selling strategy and what kind of buyer negotiations you can expect to encounter. Agents have the tools and know-how to perform a complete analysis of the market to help you decide when the right time is to sell.

Find the Right Agent

Real estate agents are the catalyst for a successful home sale. They not only bring a wealth of resources to the table, but they can also offer helpful advice on the optimal time to sell. Agents can assess your goals for selling your home, how that aligns with your budget, and how those factors fit into the context of current local market conditions.

To truly know whether it’s the right time to sell, it’s important to find the right agent who understands the needs of your household. The more an agent knows about your situation, the better they can formulate a selling strategy. This also allows them to understand what the best offer for your home looks like. When searching for an agent, ask for referrals from your inner circle. Interview multiple agents to get an idea of their qualities, and select the one that makes the most sense for you.

When you’re ready to sell, or if you have any questions about the selling process, talk to an experienced Windermere agent here: Connect with an Agent