What’s going on with our Salt Lake City market in 2021? There are several key stats you need to know to answer that question.
Let’s start with the absorption rate. In a normal market, we Realtors have about four to six months of inventory to deal with. We recently did a video focusing on the absorption rate, and it was low then, but it’s even lower now. Specifically, there’s less than two week’s worth of inventory available, which is extremely low. Essentially, if everybody stopped putting homes on the market, we’d run out of listings in two weeks.
Next up is the average days on market. This indicates how fast the market is moving. In the last quarter of each year, things tend to slow down because it’s the holiday season and people usually put their home-buying plans on hold. In the fourth quarter of 2020, though, homes’ average days on market dropped to just eight days, which is lower than the nine- to 12-day range we saw in fall and summer.
If you look at the Home Sales Per Quarter graph at 1:55 in the video, you can see that although inventory dropped significantly over the course of 2020, demand remained constant and even started to increase as the year continued. This has put even more pressure on buyers trying to find the right home. In the next graph at 2:16, you can see that active listings are down nearly 60% compared to where they were last year, while the number of homes under contract has increased by almost 13%. More buyers are buying even though there are fewer homes to buy.
At this point, you might be asking yourself: What’s driving this market? The answer is low interest rates. Despite the pandemic, jobs are plentiful, wages are rising, and interest rates are low. The No. 1 factor that influences a buyer’s buying power isn’t their income or credit score—it’s interest rates. They’re what’s driving demand, so keep an eye on them. If they start increasing or more people start losing their jobs, that will slow down our housing market. We don’t see any sign of that happening, though.
If you’re a seller in this market, congratulations. You will get top dollar or more for your home if you list it, but don’t discount the importance of having a Realtor on your side to help you navigate any bumps in the road. If you’re a buyer, the situation is tough, so it’s even more important to have a Realtor help you find a good deal.
As always, if you have questions about our Salt Lake City market or there’s anything else we can assist you with, don’t hesitate to reach out to us. We’d love to hear from you.