When I think about where we were at the end of March 2020, it’s amazing that we had one of the highest levels of appreciation ever in the Salt Lake County residential real estate market. So let’s get to the numbers and the reasons why.
4th Quarter 2020 Results:
The median price of a single family home in Salt Lake County increased from $384,000 in the 4th quarter of 2019, to $440,000 in the 4th quarter of 2020, a 14.6% increase. This is the greatest amount of appreciation that we’ve seen since the 4th quarter 2012 to the 4th quarter 2013, when the median price increased by 15.9%, at the beginning of the housing market recovery.
We are currently seeing a trend that also happened in 2012 and 2013.
Nearly every year since the market recovery, the majority of appreciation happens in the first half of the year, primarily in the 2nd quarter, and then values flatten in the second half of the year until the first half of the following year.
Currently, the median value of a single family home has appreciated for four consecutive quarters, since the 4th quarter of 2019, and it looks like that will continue for at least the first two quarters of 2021.
The last time this happened we saw six consecutive quarters of appreciation from the 1st quarter of 2012 to the 3rd quarter of 2013.
The median price of a condo/townhouse in Salt Lake County increased from $280,000 in the 4th quarter of 2019, to $325,000 in the 4th quarter of 2020, a 16.1% increase. This is the highest level of appreciation that we’ve ever seen in the condo market, and is just slightly higher than the 15.8% appreciation that occurred between 4th quarter 2012 and 4th quarter 2013.
The condo market has seen median value appreciation for nine out of the last ten quarters in a row, starting in the 2nd quarter of 2018.
The Reasons Why:
I’ll sum it up, and then we’ll get into some of the details.
- Shortage of homes for sale
- Declining Interest Rates
- The state of Utah had the highest rate of population growth in the nation over the last decade at 15.5% (2010-2019)
- The state of Utah has the highest rate of job growth in the nation over the last decade at 29.4% (2010-2019) and is an outlier when you consider that Idaho was #2 at 25.2% and Arizona was #3 at 19.0%
- Utah has had the second most resilient economy during the COVID-19 pandemic, with negative job growth of -0.9% from September 2019 to September 2020. Idaho was #1 at -0.5% and the national average is -6.4%. New York was at -11.0%, California -8.4%, Hawaii -18.4%.
- Salt Lake is a highly desirable place to live and is considered a Zoomtown
- Many people have decided to stay in their current home during the pandemic
- New construction isn’t keeping up with demand
Shortage of Homes For Sale:
For decades, the increase in housing units has always slightly exceeded the increase in the number of households, until now. The current estimated housing shortage for Salt Lake County, per James Wood of the Kem C. Gardner Policy Institute at the University of Utah, is a shortage 5,500 housing units.
This is pretty significant considering the total number of residential units sold in Salt Lake County during 2020 came to about 18,800 units, not including residential new construction that was not listed on the Wasatch Front MLS.
Declining Interest Rates:
Interest rates hit a new historical low in December 2020 due to the actions that the Federal Reserve took to keep the country out of an economic recession.
In December 2020 the average 30 year mortgage rate was at 2.7%. In March 2020, the 30-year rate was at 3.5%. That decline equates to a 10.7% decrease in the cost of borrowed money in a monthly mortgage payment (principal & interest).
Interest rates have actually been declining since November 2018 when the average 30-year rate was at 4.8%, the highest rate in the last ten years. The difference in the monthly payment between 4.8% and 2.7% is a decrease of 29.4% (p & i).
The median value of a single family home in Salt Lake County increased by 23.9% during this time, so the monthly principal and interest payment on a mortgage for a home purchase is actually less right now than it was two years ago, but I’m guessing that people that bought in 2018 have refinanced by now.
If you have any questions about buying or selling real estate in and around Salt Lake County, wonder what your home is worth, or have a friend or family member that needs help buying or selling, please contact me. I’ve been a Realtor in Salt Lake since 1999, and absolutely love what I do, and I can’t do it without you.
REALTOR BROKER MBA CRS
M: (801) 243-0699