Many Salt Lake City home buyers focus on price per square feet as an indicator of how good a deal they are getting. This is one factor to consider, but there are many other factors like condition, location, commute, schools and the potential for appreciation. Today we’ll look at potential for appreciation as it relates to supply and demand.
It’s hard to know for sure how good of an investment a specific Salt Lake home or condo will be or what the demand will be for it in the future, but you can look at what the current supply and demand is if you’re working with a Salt Lake City Realtor who has access to that information. It’s a key factor to consider, because supply and demand affects price and appreciation over the long term.
To make this comparison we will compare two fantasy condo complexes and the number of units in each that are for sale, under contract and sold in the last 3 months. From this information we’ll determine how many months it will take to sell all the units in each condo compelx.
Primo Condos OK Condos
Active (units for sale) 6 units 12 units
Under Contract (accepted offer, not closed) 1 unit 0 units
Sold in the last 3 months 3 units 1 unit
Time to sell current inventory (months) 6 months 36 months
Right now, the OK condos have high condo supply and low buyer demand. If the supply is high and the demand is low, eventually prices will need to drop to attract more condo buyers. At some lower price, the OK condos will sell faster, but for now there is 36 months of inventory with only 1 condo unit selling every 3 months. There is a good chance that the prices will decrease down due to the high inventory in the OK Condos.
There is clearly more demand for the Primo condos with 1 selling per month and only 6 months of inventory. If this trend continues, the prices in the Primo Condos would outperform the prices in the OK Condos.
If you were a Salt Lake City condo buyer and you were interested in buying a unit in either the Primo Condos or the OK Condos, all other things equal, it would most likely be a better investment to buy a unit in the Primo Condos.
This is one key factor that most of the buyers I work with consider when they work with me to find their Salt Lake City home or condo.
If you need help with the purchase of a Salt Lake City home, condo or duplex, please contact me. I’m an experienced Salt Lake City realtor and the majority of my clients are buyers of Salt Lake City homes and condos.
Associate Broker, MBA
SLCHomes Real Estate
Further explanation and notes on the examples given above:
The Math for the OK Condos: There are 12 units for sale. If 1 sells every 3 months, 4 will sell in a year and it will take 36 months (3 years) to sell all 12 units.
The Math for the Primo Condos: There are 6 units for sale. If 3 sell every 3 months, that’s 1 unit sold per month, so in 6 months they would all sell.
This example is like looking at a snap shot, a moment in time for sake of comparison and is only one factor to consider when buying Salt Lake City homes and condos. Also, it’s not a guarantee of price appreciation.