It’s good to be finished with 2020. What a rollercoaster year. Now the big question on everyone’s mind, will 2021 be a repeat?
Sure there’s a Covid vaccine coming out, but there’s also a new strain of Covid. So has 2020 become the new normal? I hope not, but we’ll see.
Whatever happens with Covid, it’s out of our hands for now. But what about our economy? Every year, I like to put my finger on the dollar’s pulse and read the tea leaves to guess at where our market is headed.
Last year, my predictions weren’t spot on, but I’m guessing that not many people would have predicted 2020 to go as it did.
So all I can do now is look at where we’re at, where we’ve been, and make my best guess at where we might be headed. If you find my ponderings interesting, great. But remember, I’m no financial advisor. Please don’t make any financial decisions based solely off of my predictions.
For 2020, I anticipated a slow down in home sales, or at the very best, that they would stay fairly even, since 2019 was showing some signs of slowing. I thought price fatigue would drive the market, and was secretly wondering if we were due for a recession, however, many of the factors that drive the market were still looking strong and steady.
Then we had the market drop on us when Covid was announced. It showed signs of being a strong decline, ushering in a full blown recession. Then to my surprise, it rebounded so quickly, that it erased most of the losses, with exception to a few select industries. Many people who were playing the stock market, had a great opportunity to really boost their portfolios during that time. By the end of the year, we were even seeing record highs for many companies again, despite Covid shutdowns.
Also, during the Summer, the real estate market in Utah saw a huge boom. Suddenly, all inventory and homes under construction were sold out. In many instances, homes in new communities were sold out a year in advance! Because of this, my prediction that prices would remain steady was way off.
This surge in demand, along with Covid caused shocks in materials, and forced most builders in Utah to raise prices quickly and steeply. Lumber alone nearly doubled in price, and business shutdowns all over the globe made it nearly impossible to get a lot of necessary items, and those that we could get, we had to pay handsomely for.
As we begin the new year, prices remain high. From what we’re seeing, approximately 25% of our new home sales are coming from out of state. Mostly California, Colorado, and Washington. This is a lot higher than we’ve noticed compared to previous years. Why this is happening, is better left to other speculators. But needless to say, that in addition to a robust and growing population here in Utah, we’re also getting a lot of people moving into our state.
Commercial building space is increasingly vacant. Where many businesses have been forced to send their employees home to work, they’re finding out that they don’t need the big office buildings as much anymore.
Also, while Utah may appear to be strong economically, especially in the residential real estate market, this is not the case for the entire country. Then again, Utah has often weathered economic difficulties better than the rest of the nation.
While last year proved that I’m not the best predictor of the economic future, if I were to take a guess at 2021, I would think that in Utah at least, we can expect to continue seeing rising costs of housing, with very low availability.
I’ve often written about Utah’s housing crisis. This crisis is brought on by very high demand and insufficient supply. This drives the affordability down for many households, and the builders that do attempt a low-priced housing option, are often forced to build communities that are so cheaply built and bland, that you can see them adopting that slummy blight that often plagues such communities after about 20 years.
In my opinion, this leads to a disturbing long-term future. The only way that I can see around this, is for cities and their residents to understand the need for more housing, and higher density housing. If existing land is available for more residential homes, then the supply of buildable land goes up, and the cost of that land will go down. This will allow and almost force competing builders to spend some of those savings on building higher quality homes.
Utah is in a transitionary stage. Most of us long-time residents are used to the small city way of life, and we resist changing to big city living. But Utah is growing, and if we don’t responsibly plan for that growth, we will inevitably build ourselves into the very thing we don’t want to be living with.
Sorry, I didn’t mean to get on my soap box. Utah has done a great job so far. It is however this writer’s personal opinion, and I don’t necessarily speak for Leisure Villas here, that Utah is in a housing crisis, and until developing new residential ground improves, Utah will continue to see rising costs of housing.
So yes I believe that 2021 will see higher demand for housing, and rising costs of those houses, especially as raw material shortages continue to be affected by Covid shutdowns.