As the world faces a sudden pandemic and drastic economic changes across the globe we are frequently being asked about how this will affect real estate within the Park City area. We are in a unique situation in that our market is significantly different than larger metro markets as we hold a significant amount of vacation property and rental property throughout the area which changes the dynamics we will see compared to a majority of the country. For instance, almost 2/3 of the transactions in the Park City market are cash purchases and not financed transactions. Wealth levels for property owners in the area are significantly different than even the Salt Lake City real estate market so the responses will be quite different from one another.
As of today, as we approach the end of March, we are only three weeks away from the first death from COVID-19 in the United States. Summit County has ordered a shelter in place for all residents until the first of May. In the last month we have seen the sharpest and fastest decline in the stock market than it has ever experienced dropping over 30%. We are beginning to see unemployment levels rise, small businesses struggle to survive, and many parts of the country sheltering in place until the virus is under control. As of this week, the Senate has approved an unprecedented two trillion dollar stimulus package to blunt the coronavirus fallout. *Updated March Data Below!
Now, what does this mean for our market here in Park City? Here are our predictions and insights into what we are currently seeing and may experience in the future as well as a bit of optimism moving forward we can count on.
1. Significant Market Slowdown Without Significant Pricing Changes... Yet
We are already seeing initial signs of a significant slowdown in pending contracts throughout the Park City area over the last 30 days. As the country began to shut down towards the end of February this cut the end of our busy ski season short about one month earlier than normal. This time is usually one of the best for our local economy with Spring Break traffic keeping everyone busy throughout the month of March. As things shut down, buyers cancelled ski trips and showings came to a screeching halt in the last 3-4 weeks.
We predict we will remain in this current state of limbo throughout our normal "mud season" until we hit May and know more about how the virus is progressing throughout the country. Buyers and sellers alike are in a holding pattern until we have more information and know how long this economic slowdown may last. If we hit the end of the slow season and begin to see signs of optimism and normalcy coming back to the world we should have pricing remain steady while we wait for activity levels to come back slowly. If we come to the end of our slow season and things have continued to decline we should expect a significant change in our market throughout the summer months with an increase in inventory and sellers beginning to reduce prices to entice value hungry buyers.
2. Vacation Home Sales Will Struggle While Primary Residence Demand Remains Strong
We have two distinctly different market segments throughout the Park City/Deer Valley areas split between full time residents and vacation property owners. With the steady flow of full timers flocking to the Park City area over the last decade the pricing for this type of inventory has grown steadily to the point where it is quite expensive to purchase a single family home for a family here. Demand for this type of inventory may slow down but we don't feel it will be enough to reduce pricing in this segment in a meaningful way. An "affordable" home in Park City has been pushing one million dollars in recent years due to the significant demand driving this segment higher and those numbers shouldn't change with a few months of economic slowdown.
What we likely will see is a significant impact in the vacation home market as buyers have experienced a significant loss in investment income in the stock markets and reduce unnecessary expenditures like vacation home and condo purchases. An increase in inventory for this type of property is also likely with some attempting to cash out of their extra real estate holdings and slim down finances or liquidate before approaching retirement. As we mentioned, many of these owners in the area have used cash to purchase the property and are not likely to be in a distressed financial situation. The increase in listing inventory will likely increase significantly here and it will come down to buyer demand in the summer months to see how this increase is absorbed before we see this reflected in pricing levels.
3. Aggressive Buyers Will Find Motivated Sellers During This Time
During times of slowdown and concern, those with the liquidity and stable financials are able to take advantage of deals throughout a concerned market. This was the case during the 2008 housing crisis and will be the same with the current slowdown we are in, however long it lasts. We have already heard of multiple sellers willing to give deals on their particular listings through other agents but none of these "deals" will be reflected in list prices. In order to obtain these values and pick up real estate at serious values you have to move quickly and be willing to throw out offers until you find motivated sellers looking to get out of the market. While we don't expect this current economic climate to be anything like the housing crisis we do still anticipate great deals to be had for those who are aggressive writing offers. With interest rates at historic lows this can be a great time to secure a deal that couldn't be had during the last few years all at low interest rates if taking on a mortgage.
4. Park City Will Fare Better Than Most Of The Country
If the downturn during 2008 taught us anything it is that our economy and real estate market in Park City is somewhat unique and insulated from the rest of the country. Since many own their property in cash and would be considered high net worth individuals we see much less delinquency and distressed sales than most real estate markets will. While other areas lost 50% of values in 2008 we saw numbers more in line with 25%-30% in losses which have now rebounded and surpassed those previous high levels. I expect the local market to react in the same manner during this time as it did through the previous recession. If we can get through the Coronavirus in the short-term (1-3 months) I expect our market to come out relatively unscathed besides a few slow months of transaction volume. Let's hope for the best case scenario as we move forward here!
These are a few quick thoughts and predictions as to what we have coming to the Park City real estate market. No one knows where this current economic environment will take us but we remain optimistic the country, and the world, can make it through this and continue on to the other side with further growth and little negative impact on the community.
*Update For March MLS Data*
What we are seeing now early on with the COVID-19 situation is a quick slowdown in the market in terms of pending contracts and overall listing inventory. In March, we had 145 listings removed or cancelled from the MLS compared to the same period last year only seeing 38 units removed. Active listings on the market for March have dropped 9% compared to March 19' and are down 12% year to date from 2019. Pending listings through March have dropped 38% compared to the year prior.
Our take on these numbers are that we are seeing two distinct things happening. Sellers are removing listings from the market to wait out the current economic challenges to see how things play out. Buyers are holding off on making purchases for the same reason which is why we see an almost 40% reduction in the amount of pending listings year over year. The closed transactions remained level since many of these were in place prior to the downturn in March and new listings hitting the MLS have also remained flat for normal March levels.
Park City will likely continue to see this same trend through April as we work our way through this health crisis. The good news is with low rates and low inventory the market will likely bounce back at a quick rate once the market and health crisis normalizes and we get back to business as usual.