As economic uncertainty from the pandemic continues to upend expectations for 2020, the tight housing market is a leading indicator of where Americans want to spend their money.
In its most recent snapshot of the U.S. housing market, Zillow reports that while the median price of a home in the U.S. dropped slightly in the month of November, it's still 12% higher than it was a year ago. In some cities — like Provo, Utah, and Boise, Idaho — the increase in median home prices is more than double the national figure.
Part of that increase stems from an influx of buyers looking to take advantage of low interest rates as they fully embrace remote work. Prices are also going up, however, because of an eye-popping lack of inventory, says Zillow economist Jeff Tucker.
"The degree to which the pool of available homes has shrunk this year is really remarkable," Tucker says.
Nationally, the number of homes for sale at the end of November shrunk by a third from the same time last year, according to Zillow. However, the decline is higher than that in the majority of metro areas that Zillow tracks. In some places, the supply has been cut in half.
A "20% year-over-year change would be more than enough to stick out as a signal of a shortage of homes," Tucker says. "So a 50% drop is staggering."
Nowhere is the shortage of houses for sale more glaring than in Utah. In Ogden and Provo, the number of homes for sale is down more than 60% from 2019. In Salt Lake City, that number is down almost 50%. And the housing market was already hot before the pandemic, says Joel Carson, a real estate agent in Salt Lake City.
There has been an inventory shortage in and around Salt Lake City for the last 15 years, Carson says, but now that demand has spiked because of the pandemic, it's pushed what was an already robust seller's market into overdrive.
"I don't want to say there's no inventory, but there is absolutely no inventory," he says. "It's awful."
It's awful for buyers, anyway, he clarifies: Carson says 2020 will be one of his best years in almost 30 years of being in business because those houses that do go on the market sell quickly and command prices at or above market value. And he says that the high demand and low supply will continue driving prices higher well into 2021.
"We're going to be going down the road of Seattle and Northern California, prices [at] $1,000 a foot," Carson says. "Right now we're $300 to $400 a foot, but I think it's just going to continue to worsen for the buyers."
In a market that is so tilted in favor of sellers, why aren't more homeowners taking advantage?
Houses are being snapped up so quickly that potential sellers don't want to put their homes on the market only to find themselves in need of a new place to live in less than month, says Michael Perry, a real estate agent in Salt Lake City who co-founded The Perry Group with his father Jack. That concern comes in addition to broader uncertainty brought about by the pandemic.
"They don't want to sell the home and then have to be a buyer, because they're on the good side and then on the brutal side," Perry says.
Video by Richard Washington
Typically, homeowners in Salt Lake City have "a massive amount of equity" in their properties, so they're able to cash in on that wealth without jumping into the robust market, he adds, either by refinancing their existing mortgage or borrowing to remodel their current homes.
Perry expects that the continued lack of inventory will continue fomenting fierce competition in the housing market well into 2021. Multiple offers are very much the norm, he says, and some competitors are waiving contingencies like home inspections (although he and his father, as well as other experts, caution against that maneuver).
Both father and son also tell their buyers that they should mentally prepare to play a long game but also be ready to act quickly: They say very few homes stay on the market longer than 10 days.
"It's even hotter than the data appears," Perry says. "It's a 24- to 72-hour market."
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