Guest Features
Experts see no slowdown in Utah’s real estate market
Adam Torkildson | Guest Writer
Utah ranks among the most populous states in the West and has seen record-breaking increases in housing prices. However, the state is currently facing a severe imbalance in its housing market.
Utah’s housing prices have soared so high that more than half of Utah’s households cannot afford to buy a home. The state’s median-priced single-family home was $460,000 in 2021. These price increases have also made it harder for renters to purchase homes, according to Wednesday’s latest research by the University of Utah’s Kem C. Gardner Policy Institute, the State of Utah’s Housing Market.
Utah’s median home sales price rose to $380,000 by 2020. In 2021, prices rose even further. The median-priced home was out of reach of 63% of renter households in 2019. According to the report, this share of renters priced out rose to almost 73% in 2020.
During Wednesday’s panel discussion, James Wood (Ivory-Boyer senior Fellow at the University of Utah’s Kem C. Gardner Policy Institute), stated that Utah has a long history of rapid housing price acceleration.
The COVID-19 Pandemic has disrupted supply chains and caused chaos in the national housing market. Utah’s housing markets have been second to Idaho in terms of hotness over the past year. Utah’s housing market experienced a remarkable 28.3% increase in prices compared to 2020. This makes it No. 2 in the country for year-over-year percentage increases. Idaho experienced a staggering 37.1% increase.
“An aberration? An anomaly? Or an outlier?” Wood stated that he wasn’t sure. “But, this year, in my many years of housing work, we have never seen anything similar.”
Wood stated that prices have skyrocketed since 2008, when the housing market crashed and was followed by the Great Recession.
He stated that he believes there is no housing bubble. “First, bubbles are defined not by deceleration, moderation, or actual price fall, but by a prolonged period of price decline.”
The report says that although both “brief” and “long-term” price drops in Utah have been associated with recessions and job losses, neither appears in the next two or three years.
Wood stated that he believes the financial markets and household balances are better off now than they were during what he considers to be Utah’s only housing bubble. Wood, a housing expert, believes there is no bubble that will burst, even though prices could slow down slightly.
According to the report, price acceleration and production will remain positive in 2022. According to the report, the year will be influenced by mortgage rates. However, demographic tailwinds are expected to keep housing demand strong for the remainder of the decade.
Eight different forecasts of mortgage rates show that the 30-year mortgage rate is currently at 3.1%. It will rise to 3.6% by 2022. The report states that although this is not a significant rise in rates it will impact affordability and cause price acceleration in Utah to single digit growth.
COVID-19 caused “unprecedented circumstances” in the country’s housing market by disrupting labor markets and supply chains. 30% of the construction materials were imported from China. The Federal Reserve also “distorted” the demand by lowering interest rates and an “extraordinary rise in liquidity via quantitative ease.” These moves “triggered high levels of demand which, in turn, pushed up housing prices at record-breaking heights,” according to the report.
This has made it worse than what housing experts had been warning about for years, even before the pandemic. According to the report, there is a 44,500-unit cumulative housing shortage between 2010 and 2020. This has led to record-low rental rates (now at 2% along the Wasatch front), the lowest ever supply of vacant homes, and the smallest number of vacant homes for sale.
The report states that “the shortage has eliminated vacant units from the market, an unhealthy situation leading to higher housing prices, and rental rates.” It will take manyyears before the housing market returns to a healthy state, given the large gap between household growth rate and the number of housing units.
