2021 Housing Outlook: Retreat From Big Cities Accelerated By Pandemic
Strong growth in burgeoning metro areas like Boise and Salt Lake City is expected to continue this year.
Mike Gould remembers what it was like a decade ago to go to a favorite fishing spot at Smith and Morehouse Reservoir, near Oakley, Utah, on a Sunday morning.
“There might have been me and one or two grizzled guys out there fishing,” Gould recalls.
Today the scene is completely different. On a recent visit, the mountain oasis was alive with 20-somethings on paddleboards and families hiking nearby — a stark contrast to its recent past.
Retreat from Big Cities
The lively Sunday scene tracks with a real estate trend accelerated by the pandemic: a retreat from big cities and busy metro areas to the relative solitude of rural and semirural areas.
The trend is evident in places like Kamas, Park City, Heber City and St. George, Utah, and in Moscow, Idaho, where homes are snatched up quickly despite their ballooning price tags.
“You’re hard-pressed to find a four-bedroom home for less than $1.5 million in Park City,” says Gould, who is Mortgage Division manager for Zions Bank’s parent company, Zions Bancorporation.
Still, $1.5 million may seem like a bargain for buyers coming from big metro areas like San Francisco, for example, with higher home prices and greater tax burdens.
Less populous locations became especially attractive during the pandemic, offering space for people to move about more freely and participate in outdoor activities. With land available for purchase, they also answer the inventory shortage plaguing population-dense areas of Utah and Idaho. At Zions Bank, construction home loans have outpaced new purchase loans in early 2021, according to Gould.
Even after vaccines are widely distributed and life returns to normal, Gould says rural and semirural markets can expect strong home sales to continue, especially with remote work options becoming more prevalent.
Boise and Salt Lake Are Hot Spots
Meanwhile, burgeoning metro areas like Boise and Salt Lake City are also experiencing strong growth.
Sizzling Wasatch Front homes sales reached record highs in 2020, with the median home price in Salt Lake County at a record $425,000, up 12% from 2019, according to the Salt Lake Board of Realtors.
Similarly, the Boise Regional Realtors reported that Ada County’s median sales price hit a record of $425,000 last year.
“It’s safe to assume for the first part of year that we will see an increase in home prices statewide in Idaho and Utah,” Gould says.
Mortgage Interest Rates Will Help Drive the Market
Yet lingering uncertainty related to the virus and economic recovery leaves many unknowns for the 2021 housing outlook. Mortgage interest rates grew in four of the first six weeks of 2021, cooling home-buying demand.
If Treasury rates continue their current trajectory, rising mortgage rates could discourage some buyers from stepping out of the rental market to purchase a home, Gould says.
That decreased demand, in turn, could slow home price growth, resulting in fewer listings as sellers wait to cash out on their homes.
“If interest rates rise, it could get more difficult to move a home quickly,” he says.
By contrast, if interest rates drop or stay flat, low rates could prompt more first-time buyers to enter the market and existing homeowners to upgrade their homes. A boost in housing demand would drive up prices, Gould said, motivating more people to put their homes up for sale.
“Either of these dueling scenarios — as a result of interest rates rising or falling — could play out this year,” he says.
Choose a Lender with a Streamlined Mortgage Application Process
If you’re seeking to close on a home this year, you’ll benefit from having a mortgage provider with a streamlined application process. Zions Bank’s Zip Mortgage* allows clients to complete their mortgage loan application in 10-15 minutes and offers a 24-hour automated underwriting system.
If tight inventory has you looking to build rather than buy, consider a Zions Bank One-Time Close Construction Loan*. This home loan bundles the lot purchase, construction and permanent loan in one transaction — which means there is only one set of home loan closing costs and loan documents. To learn more, contact a Zions Bank Mortgage loan officer.
*Loans subject to credit approval. Terms and conditions apply. See a banker for details.
Kallee Feuz is a Public Relations officer for Zions Bank.