This all leads us to the next topic:
Interest Rates
For those that still need to borrow money in order to purchase a home, with higher interest rates on mortgages comes decreased Buying power. When mortgage rates increase, mortgage applications decrease as more buyers (especially first-time buyers) are priced out of the market, according to Realtor.com. In addition to still-rising housing costs, higher rates result in higher mortgage payments creating even more hesitation for borrowing Buyers when it comes to purchasing now or waiting. On average, interest rates topped 5% in April for the first time in ten years and are definitely expected to keep rising and currently, we can find rates in the mid-5’s.
The question is, how much will this affect the Park City real estate market specifically where the majority of Buyers are paying in cash? Will we simply begin to see more and more cash purchases as Buyers start to back off from borrowing money? Typically and (roughly), we have been seeing about 40+% of Buyers borrowing to purchase and 60% using all cash, but again, that was back when money was cheap! We are eager to see how this pans out and ultimately the affects on the Buyer pools in our market.
Predictions about the effect of rising interest rates on the national market vary widely. Zillow is predicting 14.9% growth; Bank of America just 10%; Fannie Mae says 10.8%; NAR predicts 5.7% and Realtor.com comes in lowest at 2.9%.
Ultimately, it is without a doubt that real estate is still one of the smartest investments to build equity and the longer you wait, the more it could potentially cost you. Don’t wait to buy real estate, buy real estate and wait.
Inventory
Normally, it is typical to see an uptick of inventory when the Spring months hit, but is that still even the case this year and what can we expect to see in the upcoming months?
According to the Park City Board of Realtors, the record low inventories ARE showing signs of recovery. In January, the combined active listings of homes and vacant land was at an all time low of 486 units. By the end of March that number had risen to 642, a 32% gain in just two months. Local Park City agents cited fears by homeowners who were on the fence about selling, now deciding to list for fear of missing the peak of price appreciation. The trend continued into April with a net gain of 80 more active listings as of April 15.
At the end of Q1-2022, Sellers who fear they may be missing out on a healthy profit brought more homes to market and at the end of Q1-2022 there were 317 homes for sale, a 20% increase. So, we may continue to see more of this, however, it is also becoming apparent that some Sellers also feel the market has ‘peaked’ so we are also left wondering how things will pan out over the next month or two.
In Conclusion
How long can Park City homeowners expect this explosive market to continue? Well, we are starting to see some easing in prices as mortgage rates rise and competitive bidding become less frequent, but the past two years continue to be described with the most superlative of adjectives: “extraordinary,” “unprecedented,” “unbelievable.” This market, and the past two years of activity, can perhaps be best illustrated with a snapshot of just first quarter sales totals since the great recession of 2008.
In the 13 years from 2008 to 2020, looking at just first-quarter sales, the market total for residential and land combined exceeded $400 million only four times and three of those years it was just by a whisker. In 2021 and 2022, not only was that ceiling broken, but sales were over $1 billion both years. Park City specifically has enjoyed a strong, sustained market because of its unique positioning as a resort and recreation market and we are continuing to see an extremely high demand for our area and similar resort markets. Is this the new normal? Only time will tell. Economic forecasts are predicting a slowdown, but none have projected a bubble bursting crash back to pre-pandemic levels.
High demand and low inventories continue to drive price gains and sales records and there likely is no “new normal” on the horizon anytime soon. We are probably a year or two from a more stable and balanced market given current demand and continuing low inventory issues.
**To close, it is also so essential not to use the broader market trends to paint a picture for every local neighborhood. The Park City market is highly segmented, and each neighborhood in Park City has unique values, unique pricing trends, and specific demand levels. For example, Park Meadows remains the most stable neighborhood in the Park City metro area with prices remaining relatively steady compared to the other highly appreciating neighborhoods. The northern neighborhoods that make up Snyderville Basin -- Pinebrook, Silver Springs, Summit Park and Jeremy Ranch continue to rise in popularity with 40 or more sales in each (exceeded by only Promontory in total number of sales). If you have questions about one area specifically, reach out to us! We’d be happy to take a deeper dive into your area of interest.
SOURCES
https://www.parkcityrealtors.com/newsroom/2020-1st-quarter-statistics
https://www.marketwatch.com/picks/home-price-appreciation-will-normalize-what-5-economists-and-real-estate-pros-predict-will-happen-to-home-prices-in-2022-01646940841
https://www.bobvila.com/articles/inflation-and-rising-mortgage-rates-affect-home-buying/
