If you go searching online for Utah homes for sale, you will run across news stories that say sales of existing homes in the state fell dramatically in May (2020). You will also discover that sales numbers across the U.S. fell for the third straight month in May. Experts say it is all due to the coronavirus pandemic.
On the other hand, dig a little deeper and you will discover that the Salt Lake City market appears as strong as ever. It’s true that the total number of houses being sold are down. But price increases continue and activity is picking up as the early days of summer begin. What we have is a market sending mixed signals.
A Historically Accurate Harbinger
Housing is one of the things economists look at when attempting to gauge the strength of the economy. It turns out that housing has historically been an accurate harbinger of things to come. This time around though, mixed signals are making it hard to figure out what housing is telling us.
The housing crash that began in 2008 was an organic crash. In other words, it occurred because too many people were given mortgages that they could not afford in the years leading up to the crash. Once banks began selling mortgages as packaged securities, investors were left with paper investments they weren’t sure would pay off. One thing led to another and housing crashed.
This time, the downturn in housing is not organic. It is artificial. It’s not that people don’t want or need houses. Rather, sales of existing homes are down because the pandemic has people staying at home. Buyers are staying home rather than shopping for houses.
Alongside this phenomenon is a slowdown in new home construction. Again, it’s not because the houses are not needed. It’s because coronavirus concerns are keeping construction workers at home just like everyone else. You essentially have a housing market that has come to a halt due to factors that are not directly related to the economy.
The Housing Need is Still There
The interesting thing about Salt Lake City, and Utah in general, is that the need for housing is still there. The state and Wasatch front region still face a significant housing shortage that will likely take years to get under control.
CityHome Collective, a Salt Lake City real estate firm, explains that there is still plenty of demand for starter homes, lofts, and even luxury homes in Salt Lake City. It is just that the demand has been pent up for the last several months.
Common sense suggests that people who would have otherwise looked for a home in the spring will do so during the summer. Markets in Utah and elsewhere could very well see a spike in sales activity over the next couple of months. It would be no surprise to see sales jump in July and August, as people already looking to buy attempt to get a deal done before autumn’s arrival.
A Post-Pandemic Boost
When it comes to most things economic, there are back and forth swings. Those swings are more pronounced when the events causing them are artificially induced. Thus, you see stock markets skyrocket for a few weeks followed by what Wall Street experts like to refer to as ‘corrections’.
Housing is no different. If history is any indication, the market is about to experience a post-pandemic boost. People are going to start buying again in the coming weeks. Prices will continue to rise, and builders will get back to work. Count on it.
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