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Home and apartment hunting in Utah are both major headaches right now, but the years ahead could get even tougher for renters and would-be homebuyers.
In a first-of-its-kind study that blends new real estate data with construction trends, top experts at the University of Utah are warning of severe imbalances in the state’s residential markets, dwindling affordability and steady rent and home price hikes well into next year and beyond.
The first-ever State of the State’s Housing Market paints a picture of a market bent out of shape to historic proportions, in part due to the pandemic. There’s now a lack of supply of dwellings of all kinds, from least to most expensive, on and off the Wasatch Front, as coronavirus-fueled demand and low-interest rates have spurred sales and pinched housing inventories across Utah.
Over half of households can no longer afford a median-priced home as of this year, the study finds. Renters, at the same time, see their path to homeownership increasingly blocked, with upward of 72% no longer able to afford a down payment and mortgage for an affordable home.
Mix all that with stubborn disruptions to world supply chains and labor markets for homebuilding and it’s no wonder many are calling this a housing crisis.
“We’ve never seen anything like this,” said senior economist and veteran housing expert James Wood, a study co-author at the University of Utah’s Kem. C. Gardner Institute in Salt Lake City. “People cannot get into the rental market or the homeownership market.”
Wood and others called for swift action on Utah’s Capitol Hill and among city leaders who are in control of zoning regulations to address the problem.
Despite all the disturbing indicators, he and others are pretty much ruling out the idea that Wasatch Front markets are developing a housing bubble. Utah’s economy remains strong in its COVID recovery and job growth is a big part of what is fueling demand.
Matt Ulrich, president of the Salt Lake Board of Realtors, sought to put a positive face on the study’s main findings, calling home markets and sales trends “healthy” though highly competitive from Logan to St. George. Leading builders, for their part, say they’re having to get “creative” in the face of unprecedented challenges to keeping prices down.
“We continue to be innovative with this opportunity,” said Paul Peterson, regional president for homebuilder Richmond American Homes, when asked to address what some builders refer to as a current “shortage of everything” when it comes to basic construction materials such as lumber, steel and household fixtures.
But the new study is a stark snapshot of how a decadeslong backlog in affordable home construction has conspired with COVID-19 to all but wipe out affordability for an increasing number of state residents.
Not once since the 1970s has Utah’s median home price risen anywhere near this fast, Wood said. Price records are being broken in just about every corner of the state. The average existing single-family home on the Wasatch Front is now over $550,000 and escalating at 28% compared to this time last year in some pockets, the new study unveiled on Wednesday shows.
Rents, too, are expected to rise by unprecedented double digits into 2022, with vacancies now lower than ever — even as new apartment complexes and town homes seem to sprout in Utah cities large and small.
Among the study’s dire findings:
• “On the ground” data confirms just how deep the housing shortage is.
The average newly listed home is now on the market for six days, a state record. Vacancies on apartments hang persistently below 2%. The level of Utah’s inventory of newly constructed homes sitting vacant in wait of a buyer is now lower it was just before the Great Recession, with a few weeks of supply on hand.
• Supply chains wrecked by international coronavirus outbreaks are still a big disruption worldwide and in Utah, especially with about a third of all U.S. construction materials coming from China.
Thousands of building permits have been approved in Utah in recent years, but housing developers are struggling with trucking backlogs and a shortage of skilled trade workers on construction sites. Record numbers of apartments are going up in Salt Lake and adjacent counties, but after almost a decade of new families being formed without new construction keeping up, there’s a housing deficit of at least 25,000 homes in Utah and probably more.
• If interest rates start inching up again, the financial outlook for first-time homebuyers could get even more frustrating, according to Dejan Eskic, senior research fellow, at Gardner Policy Institute — especially in light of prices rising at record rates.
• All of this is hitting lower-income households in Utah hardest. Almost 20% of the state’s 300,000 renters are cost-burdened, meaning they spend half their paychecks or more on housing costs, according to Wood. “That’s a big number,” he said. “If they should have a life-changing event, they’re on the verge of homelessness.”
Editor’s note: The Tribune will update this developing story.
Read More:Utah’s overheating housing market isn’t a bubble and could get worse, experts warn