How has inflation affected the Park City housing market?

There are at least two very distinct ways that the Park City Real Estate housing market has been affected by inflation:

- The Federal Reserve's efforts to stave inflation by raising interest rates
- The cost of goods and construction prices going up, due to supply chain and labor issues.

INTEREST RATES:

According to an article published on bankrate.com, from 2021 to 2022 the average percentage of the monthly income a homeowner would have to pay rose from 19% to 26% in 2022. Homeowners are paying over a quarter of their monthly income to buy a home in today's market. This high cost contributes to the slowdown most markets have experienced. Many buyers are waiting for home prices or interest rates to drop before purchasing a home. This is especially if they are still saving for a down payment to help lower their monthly mortgage payments.

According to the National Association of Realtors, pending home sales for November 2022 hit their lowest point since tracking began in 2001. As interest rates climbed at one of the fastest paces on record this year, pending home sales recorded the second-lowest monthly reading in 20 years, according to NAR Chief Economist Lawrence Yun. The high interest rates drastically cut into the number of contract signings to buy a home.  "Falling home sales and construction have hurt broader economic activity."

Construction Costs:

The National Association of Home Builders have stated that construction expenses have increased 35% since covid, while mortgage rates have doubled. High costs and interest rates have left homebuilders with fewer purchasers and more expenses. It's been very common for builders in this market to raise the price of their homes on buyers, despite being under contract for a lower amount.

During the peak of the real estate boom in 2021, some homebuilders couldn't hold onto inventory. Therefore, purchasing incentives went away. However, now we are seeing more and more builder incentives, including interest rate buydowns, free upgrades, and credit towards upgrades. Some new construction in the Park City area has even seen price reductions instead of price raises.

Inflation and Park City Real Estate: Is it still a good time to buy or sell my Park City home?

An advantage the Park City market has in this real estate environment is that it is a lifestyle and luxury market. The demographic that visits Park City won't change their lifestyle goals and dreams in the face of a changing real estate market. Although the broader market has slowed down significantly, there is still an increase in available inventory.  However, still about half the inventory pre-pandemic. This suggests that it remains a favorable market to buy real estate.

Also, buyers will have more options to choose from than those experienced during the pandemic. Furthermore, it's worth noting that the lifestyle and luxury market tends to remain more stable in economic downturns. For sellers, there is still plenty of unrealized equity gained over the past couple of years as well. Click here to receive a market analysis for your home today.