The Utah Housing Market
Just how turbulent is the Utah housing market right now? Ask any Salt Lake City area homeowner, and you’re likely to get an earful about how the Utah housing market has changed in the last year. A year ago prices were increasing rapidly, there were multiple offers on any property for sale and buyers were very discouraged with trying to find a house. Fast forward to early 2023 and boy things have changed. Interest rates have doubled in the last year taking many buyers out of the market because of affordability. It really boils down to supply and demand.
Home sales have certainly slowed and the amount of time it takes for a house to sale has increased in the last year which means there are more homes for buyers to look at. Those buyers also do not need to be in such a rush to make an offer since competition is much lower because of fewer buyers in the market. However, the demand for housing remains strong with people moving into the state and our children growing up, getting married and needing housing. While interest rates may be keeping these young buyers away now, a small shift down in interest rates could bring a lot of buyers back to the market including buyers that have been sitting on the sidelines.
Supply and the Utah Housing Market
The supply of homes available for sale is slightly up for the first quarter of 2023 but still very low when compared to an average market. Much of the reason for this is high interest rates. The people that have a rate in the 2 to 4 percent area are hesitant to sell because their rate on a new mortgage will be much higher. Another factor of low home supply is that builders have, once again, reduced the number of housing unites they are building. This also happened for several years after the economic crash of 2008. 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.
In the first three months of 2023, the Utah housing market was/has ??, 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.
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 2.4 percent in January of 2023; it is lower the national rate of 3.4%.
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 783 between 2007 and the beginning of 2023. However, the index has come down a little from the 2nd quarter 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 the end of March 2023, the median price of a single family home in Utah is $501,000 ?? with forecasters predicting flattening or slightly lower median home prices through 2023. Let’s look at some of our neighbors. As of February 28, 2023, the current home value in Colorado is $530,389, while Nevada can command a much more affordable $409,400. 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 $82,206. That’s a little over $13,000 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 million while a city like Provo has a median home value of approximately $446,221 as of February 23, 2023. 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 $138,000, while Provo reports only $51,532.
But as the last few years have reminded us as we go through 2023, 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 mostly characterized as a typical flu strain.
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, 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 that lasted about five months. Home sales started back up in early 2022 until interest rates climbed very fast around May of 2023. This started the decline in number of homes sold we see in early 2023.
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.