Salt Lake City’s home prices will keep pace with the nation’s in 2021 while home sales should be above that of the rest of the U.S.
That’s according to a 2021 housing forecast by Realtor.com. It projects Salt Lake City home prices growing by 5.7 percent during the year — matching the national projection, which would be a record-high. Meanwhile, home sales should rise 7.5 percent, above the 7 percent expected nationwide, Realtor.com said, categorizing the national level as “a healthy pace.”
As with many elements of the economy, the year has “wildcards,” including the COVID pandemic and the possibility of a double-dip recession.
Inventory is expected to make a slow but steady comeback, which will give buyers some relief. However, increasing interest rates and prices will make affordability a challenge throughout the year, it said.
“The 2021 housing market will be much more ‘normal’ than the wild swings we saw in 2020,” said Danielle Hale, Realtor.com’s chief economist. “Buyers may finally have a better selection of homes to choose from later in the year, but will face a renewed challenge of affordability as prices stay high and mortgage rates rise.”
As has been the case in Utah, Hale said that millennial and Generation Z first-time buyers will be affected the most by rising home prices and interest rates because they have less cash and no home equity.
“While waiting until the fall or winter months of 2021 may mean more home options to choose from, buyers who can find a home to buy earlier in the year will likely see lower prices and mortgage rates,” she said.
Realtor.com is predicting mortgage rates to hover near 3 percent but rise to 3.4 percent by the end of 2021. Single-family home starts should be up 9 percent from 2020, and the homeownership rate should be 65.9 percent.
The strongest home price increase this year among the top 100 metro areas is projected to occur in the Sacramento, Roseville, Arden and Arcade area of California, at 17.2 percent. The largest year-over-year home sales increase should occur in the San Jose, Sunnyvale and Santa Clara area of California, at 10.8 percent.
Among the 2021 trends will be Gen-Zers becoming market players. Millennials, the largest generation in history, will continue to shape the housing market as they outnumber both Gen-X and baby boomers. Older millennials will likely be trade-up buyers while the larger, younger segment of the generation age into their key home-buying years.
Gen-Z will begin to make its presence known in 2021 as they compete with younger millennials for entry-level homes, Realtor.com said. The oldest members of Gen-Z will turn 24 in 2021 and their impact on the market will only continue to grow from here, it said.
For home buyers, 2021 will see more homes hit the market but affordability will remain an issue with continuing home price increases. Also, the time it takes to sell a home will slow from late 2020’s frenzy, but fast sales will remain in many parts of the country, which will be particularly difficult for first-time buyers learning the ins and outs of homebuying.
Sellers will continue to hold the upper hand throughout 2021 as the number of buyers in the market outweighs the number of homes for sale. Home prices won’t grow as fast as they did in 2020, but steady increases will continue to push them to new highs. Sellers also can expect their home to sell relatively quickly in 2021, so having their next home lined up will be key. Many sellers are also buyers themselves, so they will struggle with the same issues when it comes to purchasing their next home.
Realtor.com also projects that inventory will begin a slow road toward recovery. A lack of homes for sale has plagued the U.S. housing market for the past five years, and the problem only intensified in 2020, in large part due to an estimated shortfall of nearly 4 million newly built homes heading into the year, as well as sellers pulling back due to COVID-19.
As for the pandemic, additional lockdowns and quarantines could put a dent in housing inventory and sales, slowing the market and putting increased pressure on buyers. But if a vaccine is rolled out quickly, it could lead to better-than-expected sales and a strong increase for home prices and inventory.
If one impact of the pandemic — remote work — remains in place, suburbs will “shine,” Realtor.com said. Lockdowns in cities led buyers to nearby suburb in search of increased space, and more workers now are enjoying the freedom to work remotely. If companies require workers to return to the office after vaccinations, demand may wane. Conversely, if companies commit long-term to remote work, demand for these homes could see an additional boost in 2021.
A double-dip recession could widen the gap between those with and without jobs as well as industries recovering well versus those seeing continued lack of business. “In the short term, this could lead to less consumer spending, which could more broadly impact businesses and economic growth. In the long term, this could impact the U.S. housing market as would-be buyers disappear from the market, cooling demand and driving down home prices,” Realtor.com said.