There may be no other industry that demonstrates the law of supply and demand as purely as residential real estate. We even recognize it in terms like ‘seller’s market’ and ‘buyer’s market’. Anyone who doesn’t believe it need look no further than two great American cities: New York, NY and Salt Lake City, UT. They are at opposite ends of the supply and demand spectrum.
The law of supply and demand is as simple as it is fundamental. In any given market, the relationship between supply and demand ultimately determines price. If more people want a product or service than is available to satisfy all of them, prices go up. The opposite is also true. If supply outstrips the number of people that want a product or service, the price falls. We know this to be true with residential property.
1. Bargain Hunting in New York
New York City is on the losing end of the supply and demand equation right now. For example, consider a condo overlooking Central Park that just sold in recent days. The 4500 square foot property, located in one of the most desirable buildings in the city, sold for $22.5 million. The seller purchased the property for $34 million just six years ago. He lost $11.5 million on the sale.
Unfortunately, the seller had two things working against him. First was a glut of luxury housing in an area of New York known as Billionaire’s Row. As early as a few years ago, prices in the area started falling significantly. Why? Because there were too many luxury housing units and not enough buyers. Nonetheless, market glut alone did not decimate the price of this condo.
The other factor working against the buyer was the coronavirus crisis. As you probably know, New York residents scared of living so close together have been fleeing the Big Apple in droves since late spring. People just do not want Manhattan real estate right now. The previous glut of luxury housing combined with coronavirus to create a perfect storm; a storm that cost this particular owner nearly $12 million.
2. A Hot Market in Salt Lake City
Just over 2,000 miles away, Salt Lake City sellers are getting top dollar for their properties. It’s been that way for a while, according to CityHome Collective. As a Salt Lake City real estate brokerage and design firm, CityHome Collective has stayed extremely busy over the last several years.
What does the Wasatch Front have that New York City and its five boroughs doesn’t? First and foremost are jobs. Salt Lake City has been an up-and-coming location for relocating businesses for nearly a decade. The entire state of Utah is actively business friendly, and in Salt Lake City, manageable taxes and an ample supply of young talent make it incredibly attractive to employers.
Salt Lake City also has space. This is important now that people are afraid of living close together in tightly packed apartment buildings in the middle of dense cities. Buyers want larger homes with bigger rooms. They want homes with self-contained offices and gyms. They want ample yard space for the kids, but with plenty of privacy. They are not going to find such things in New York City. They will find them in Utah.
The median price for a home in the Salt Lake City region is roughly $430,000. Prices have been steadily climbing for quite some time. Why? Because demand outstrips supply. It is just the opposite in New York City, where there are not enough buyers to snap up all the expensive properties for sale.