Just how turbulent is the Utah housing market right now? Ask any Salt Lake City homeowner, and you’re likely to get an earful about how hard it is to find a property to purchase and how much prices have gone up. It really boils down to supply and demand. But we are also starting to see interest rates for mortgages increase which increases house payments. Will increasing interest rates help the housing supply making it easier to find a house to buy?
Supply and the Utah Housing Market
In the first three months of 2022 (not on this graph), the Utah housing market was staying on its current trajectory of big price increases, but there has been an increase in listings that is typical for early spring. You can see by the graph above that the median home price increased from $375,000 in the 4th quarter 2020 to $469,000 in the 4th quarter of 2021. The first quarter of 2022 has seen similar increases while the total number of houses sold is declining. This is certainly not a favorable trend for home buyers. One bit of good news is that rising mortgage interest rates may slow the home appreciation rate.
Typically, this would be the sign of a resilient and confident economy. And Utah certainly knows a thing or two about both resilience and confidence.
The Utah housing market, like much of the United States, is affected by supply and demand. Right now there is little supply for a lot pf pent up demand. The total number of housing starts, including the Utah housing market, started to decline in 2006 and bottomed out in 2010. More on historical housing starts here. We have had a growing population with slowing home building since 2005.
What about Utah’s demand for housing? Like most of the country, the demand for housing is high in Utah. What are some things that drive the demand side of housing in Utah?
Demand and the Utah Housing Market
The “Silicon Slopes” And The Tech Boom In Utah
Compared to other states of similar size, Utah’s economy has never particularly lagged or faced drastic underdevelopment. Even at the height of the 2007-2009 recession when Utah homeowners saw an estimated $25 billion loss in equity, we were able to weather the storm relatively unscathed. Not just unscathed, but healthier than ever. Even in the current face of economic uncertainty as world events become more uncertain and with waning Covid-19 issues, Utah’s unemployment rate was only 2.1 percent in February of 2022; less than half the national rate of 3.8%.
But for a long time, very few people would have ever referred to Utah as an “innovation” state. In fact, it wasn’t what you’d call a national player on the economic stage at all. We may have some of the best ranked schools in the nation; but if you were to ask someone from New York or Los Angeles to name Utah’s single most significant export, you might find yourself waiting much longer than expected.
That all changed back in 2007 with the publication of the State New Economy Index, which specifically named Utah as the top state in the nation for economic dynamism based on “the degree to which state economies are knowledge-based, globalized, entrepreneurial, information technology-driven, and innovation-based.” And people listened. More specifically, tech startups who found the low cost and relaxed pace of Utah much more accommodating for their needs than the over-saturation of San Jose or Palo Alto. As a result, Utah now plays home to what’s been affectionately nicknamed the “Silicon Slopes”; a multi-city hot-bed of technology and innovation including Salt Lake City and Provo, hosting key industry players including Adobe, Facebook, Northrop Grumman, Oracle and Cisco alongside major government initiatives such as the NSA’s National Data Center.
The impact on Utah’s housing market can’t be overstated. Not only has Utah been historically named one of the top states in the country for future job growth, but Utah’s housing price index skyrocketed from approximately 375 to well over 533 between 2007 and 2020 and is still climbing at the beginning of 2022. And that’s in spite of two recessions occurring in less than fifteen years!
Affordability, Not Cheapness: The Cost of Living In Utah
As of February 2022, the median price of a single family home in Utah is $501,000, with forecasters predicting a one year increase of over five percent in 2022. At first glance, that seems steep. And it is. But let’s look at some of our neighbors. As of March 25, 2022 The current home value in Colorado is $558,210, while Nevada can command a much more affordable $434,698. All three states rely heavily on tourism as a major industry. So why is there such a dramatic contrast in home values?
The cost of living. Fortunately, Utah has a lower average cost of living compared to the rest of the country. Unfortunately? It’s not that much lower. According to a 2019 report from independent tax policy analysts the Tax Foundation, Utah only ranks number 28 in the country in costs of living, while Colorado and Nevada occupy numbers 40 and 30 respectively.
Recent statistics from the US Census Bureau indicate the median household income in Salt Lake County is $77,128. That’s a little over $12,000 more than Salt Lake City itself and over $10,000 higher than the national average!
Utah may be more affordable than the likes of Massachusetts and California, but that doesn’t mean it’s necessarily cheap. It’s a matter of perspective as well as an indicator of the economic diversity of Utah. And just because Utah is comparably isolated doesn’t necessarily mean anything less than a stark difference in income and cost of living. The average home for sale in a town like Alpine is reportedly close to $1.2 million while a city like Provo has a median home value of approximately $483,680. Why such a drastic discrepancy in costs between two cities separated by only 19 miles? The median household income in Alpine is a little over $123,000, while Provo reports only $51,532.
But as 2021 has reminded us as we go through 2022, those numbers can change overnight.
The Coronavirus Pandemic And Utah
A good thing for the country and the world is that the Covid-19 situation is improving as we enter 2022.
If Utah’s economy and job growth potential can be seen as a model for the rest of the country, then our response to the coronavirus pandemic is nothing short of inspiring.
But while both the decline in reported cases as well as our response to the pandemic may be admirable, the coronavirus is unfortunately not predictable. It’s an understatement to state that it’s made us rethink our entire understanding of economic and industry factors, not the least of which is our housing market in Utah. And Salt Lake City is an excellent example. Home sales suffered a sharp decrease in the third quarter of 2021 in our capital city; and a year later home sales are still declining quarter over quarter as the graph at the beginning of the article shows. Declining home sales coupled with strong demand, really shows that the supply of houses is very low.
Religious Affiliation And Utah Real Estate
Despite the increased focus on economic development and the tech boom, there’s one factor that’s virtually synonymous with Utah: the Church of Latter Day Saints (Mormons). Over 2.1 million Utah residents currently identify as LDS—close to 70 percent of our entire population. And with over 5,200 congregations and almost 15 temples in the state and growing, it’s fair Utah has historically been the very heartbeat of the LDS movement. But how does this affect the real estate market?
One way Utah is affected is the the people in this religion love to have large families, and many of the children of these large families want to stay in Utah and have large families. We have strong internal growth in Utah.
Tourism’s always been a key industry in Utah, drawing close to 20 million visitors in 2018 alone. But equally remarkable is the dramatic growth of LDS missionaries from around the world. And with the oldest and largest LDS Missionary Training Center centered in Provo, it’s only natural that adherents who find their calling in spreading the doctrine will look for housing within the state.
The Future Of The Utah Housing Market?
Not only do Utah’s children want to stay in Utah for the most part, people want to move to Utah putting pressure on the housing supply.
Real estate is never a predictable industry, even during economic upswings. Demographics, job concentration, nearby amenities and tax rates are just a few of the chief factors that affect the national housing market. And they’re subject to change without warning.
What affects the national housing market also affects Utah’s housing market as well. We may be blessed with many things; natural beauty, a major highway like I-15 connecting otherwise disparate regions and some of the friendliest people you’ll ever meet. But there’s only one crucial difference between Utah and much of the rest of the country.
Our resilience. And that’s as true of Utah’s real estate market is it is of our general character. We’ve weathered recessions and economic downturns with sheer fortitude over the past few decades, and we’ll weather a public health emergency with grit and determination. It’s in our bloodstream.
And if you’re a Utah homeowner, it’s in yours too. But the unfortunate reality is that much like the rest of the country, you may also be affected by any number of circumstances that require you to sell your home fast. It’s never an easy decision, and we hope it’s one which doesn’t require you to move out of state. But what if there was a way to sell your home without actually having to move? At Gary Buys Houses, we offer exactly that. It’s called our “Sell Now, Move Later” program. We’ll purchase your home quickly at a price that’s fair—frequently, in as little as 3-5 business days. What’s more, we’ll allow you to stay in it as long as you need. We’ll even arrange to sell it back to you if you find yourself in a position to own your own home again.
We’re proud to live here in Utah. We’re proud to have you as our neighbor. And we hope that your future here is as bright and hopeful as you are.