Nestled between Utah Lake and the towering peaks of the Wasatch Mountain Range, it is hard to imagine that anything in the Provo-Orem metropolitan area could be anything other than serene. But for the past 12 months, the metro’s housing market has been in complete chaos.
“It is hot, hot, hot here,” Clay Winder, a real estate agent for Keller Williams Westfield, said. “The Provo-Orem market is growing at a faster rate per capita than really anywhere else in the state of Utah, including our capital, Salt Lake City.”
The median home price in Provo was up 24.4% to $410,000 in August compared to the year prior, while in Orem it was up 22.2% to $440,000, according to reports from Redfin. In comparison, the national median was only up 16.2% year-over-year.
On average, in August 2021, homes in the area sold for about 2.5% above the list price and sat on the market about 11 days before going pending. Newer homes and fully updated older houses, however, were selling, on average, for about 6% above asking and only sitting six days before going pending.
“If the house is over the average days on the market, buyers can offer list price, but if it’s new to the market on an opening weekend, they might go $5,000 to $10,000 over,” Becca Summers, a local Keller Williams agent said. “So, for sellers, making sure that their house is ready to go opening weekend is critical more so now than it has been in months past because if it sits past that opening weekend, buyers wonder what’s wrong with it.”
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As is true in most other metros nationwide, the rapid price increases have been driven by strong demand and low inventory. Several real estate brokers and agents who spoke with HousingWire cited three main reasons for this increase in demand: Utah’s high birth rate, the rise of “Silicon Slopes,” and COVID-19 and state government policies related to the pandemic.
With a large Mormon population, Utah has the highest birthrate in the country. This means that the number of millennials who are reaching the average homebuying age is even greater in Utah than elsewhere in the country.
“Net in migration has really added to the mix of factors driving housing demand in the state,” Matt Barton, the principal broker at Century 21 Everest Realty Group. “It is a confluence of different factors, but the naturally high birth rate has been here for forever and the population is really just starting to grow.”
Although the intrastate migration has been part of the increase in demand, the rapid influx of tech companies into the area just north of Provo-Orem, which has been nicknamed “Silicon Slopes,” has been a primary source of interstate migration. Companies with offices in “Silicon Slopes” include Domo, Adobe, eBay and Facebook.
“We’ve had an explosion over the past three four years of technology and other companies coming in,” Barton said. “I mean driving down I-15, it is like every other week you see a new building going up…So we have had an abnormal influx of people from states like California, even from the Northwest coming in because companies looked at the cost of living prior to everything going crazy, and said, ‘Hey, Utah is affordable and it’s not congested, let’s go there.’”
While these first two reasons could have increased movement to Provo-Orem at any time, the COVID-19 pandemic brought on a special set of circumstances that further spurred migration to the metro. Compared to California, Utah has been fairly relaxed with COVID-19 restrictions. The governor did not put a mask mandate in place until early November 2020 and students in many districts were able to attend school in person for the entire 2020-21 school year.
“I have a lot of people I’ve talked with that have come here because we are in school full-time,” Summers said. “Kids aren’t doing remote stuff. You can wear a mask, but you don’t have to wear a mask. So a lot of people who want more options with Covid have moved to Utah for that, but especially the schooling — that’s been a big one.”
Since July, however, things have finally started to slow down in the Provo-Orem housing market. In the spring and early summer of 2021, many of the real estate professionals that spoke to HousingWire said it was not uncommon to receive 20-30 offers on a property within a few days of it coming on the market. Now they are seeing hot properties receive three or four offers, however certain properties are still generating upwards of 10 offers, reflecting a nationwide decrease in bidding wars.
“May and June of this year we were still seeing in the realm of crazy, where you put up a an attainable property right and you may be getting somewhere between, no joke, 20 to 30 offers, with waving appraisal contingencies, doing non-refundable earnest money upon acceptance and acceleration clauses,” Barton said. “That was the norm from last summer to the front end of this summer, but as we’ve seen things have started to slow down. My agents are still getting three to four offers on a house. There are still some buyers out there, but it’s not anywhere close to how off-the-chart aggressive it was a few months ago.”
Agents and brokers in the area, however, don’t feel like this slowdown is a huge cause for concern.
“It’s statistically slower a little bit, but the supply and demand ratio is still tight though,” Devin Haub a local RE/MAX Realtor said. “So there will probably be fewer fourth quarter transactions overall, but there’s less listings and less buyers so that supply and demand ratio still stays very tight, making it a competitive market.”
But residents and homebuyers alike are facing a new problem: they are running out of land to build on.
“If you look at our geography, we don’t have much land left to build on,” Haub said. “So despite the fact that nobody likes these prices, if they continue to want to live here, there’s not anywhere for them to go but close to the city. It isn’t like Texas where you can just add a ring around the city and just keep expanding — you can’t do that here. You have the mountains and the lake, so all the homes are squeezed between the lake and the mountains and unless you want to go on the other side of the mountain and drive an hour or two, everyone is aiming for the same location.”
As they look toward the future, area agents and brokers expect prices in the area to continue to increase, but not at the accelerated rate they have over the past year.
“If we assume we are returning to normal market patterns, with October to January being slower sales, and with talk of mortgage rates going up almost by a full point by the end of next year and that is going to have an interesting effect because when rates start to go up you see a flurry of activity because people kind of panic and with that, prices will also start to rise again,” Barton said. “So you’ll get this initial burst of people that will do whatever they need to, to get into a house and then it will settle down. I think by the end of next summer, we’re going to know what this market really is.”
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