House Under Water

Utah has the number one housing market in the country. Over the last few years, home prices in Utah have skyrocketed to record levels, making homes unaffordable for many who live here. Currently in 2022 escalating interest rates are further punishing those who still haven't purchased a home. As a state, we're quickly reaching a point of unaffordability. This leaves a lot of us wondering, is Utah's housing market going to crash, or is Utah's housing market going to continue to run?

Utah's Population is Exploding

So why is Utah's population exploding? The number one reason, Utah is just a great place to live. People are friendly, there's a lot to do, especially if you like the outdoors, and the government stays out of our business, among other things. It's a combination of many things happening all at once.

During the covid shutdown of 2020 and 2021, a lot of corporations benefited from having their employees work from home and decided to make it permanent. This allowed millions of Americans to live wherever they want, causing a mass exodus from poorly run states with higher taxes. When you combine the COVID effect with the record low mortgage interest rates that we saw last year, it was easy for people to make the move to more desirable locations like Utah.

Why are housing prices increasing in Utah predicted that in 2022, Salt Lake City and the surrounding metros would be the number one housing market in the nation. Why? Because we have a historically strong economy, the fastest pace of job growth, very low unemployment, very few mortgage delinquencies, and low taxes. The expectation for Utah in 2022 is that despite increasing mortgage interest rates, it will remain a seller's market. Homes will continue to sell and prices will continue to climb.

We expect double digit gains again with some metros getting close to 20%. One of the main reasons; Utah is in a severe housing shortage and can't catch up because people keep moving here. Home builders are shouldering a heavy workload because only a small percentage of Utahans are leaving. Unfortunately, the time to construct a home has increased thanks to the shortage of supplies and labor.

To start the year, predicted that Salt Lake City would see a sales growth of 15.2% with price growth of 8.5%, for combined growth of 23.7%, ranking us as the number one housing market in the nation. But the Deseret News just reported that three Utah cities are among the nation's most overvalued markets. Provo and Salt Lake City are all in the top 10, forcing buyers to pay higher premiums. Ogden is number three on the list at 63.33%. Provo is number eight. And Salt Lake City is number nine. The article goes on to say in high demand areas like Utah, where a years long housing shortage has pushed inventory extremely low, local experts have said rising mortgage rates will likely only slow, not stop housing price increases while pricing out even more potential home buyers.

Housing Market Report

Let's look at the most recent housing numbers as reported by ending April, 2022. When looking closer at the graph, you can see that the median days on market is only six. Homes are still selling in less than a week. And 3,926 homes were sold. We saw 5,684 homes listed for sale. That's only 378 more than last year at the same time. The most shocking number is the median sold price of $580,000, up 23.1% from last year at this time.

Will Utah Housing Market Crash in 2022?

These price increases are unsustainable, especially with the drastic increase in interest rates. Should rates continue their upward trend, which they are expected to do, things will surely slow down, but Utah's housing market will not crash.

Utah currently has a one month supply of homes for sale. A healthy housing market will have a six month supply. That's a huge gap. If you're moving to Utah, or you're already here and you're planning to buy a home, this is what you should expect. It's likely that you'll find yourself in multiple offer situations. You'll probably need to offer above the asking price. 

Utah is the Fasted Growing State

Did you know that over the last decade, Utah is the fastest growing state? Utah's population grew by 18.4% in the last decade to 3.28 million humans, making us the 30 most populated state. Everyone in Utah seems to hate the C word, but I'm going to say it. Californians are putting a lot of upward pressure on our home prices. But you can't blame it all on our friends to the west. People are coming here from many different locations. Migration to Utah, specifically the Salt Lake City area is still at all time highs. And demand is so strong that we're still struggling to keep up.

Buy a Home Now If you Can

For those of you who really want to buy a home and you can still afford one, I advise you to move quickly. Increasing interest rates could greatly overshadow any sort of correction if one was to happen. And it doesn't look like Utah will see price reductions anytime soon. I

2022 started off with a bang, proving that the secret is out. Utah is an amazing place to live. Looking back at 2021 in Utah, 55,588 homes were sold, and the median price was up 24.6% from the previous year at $442,000. In Salt Lake County, 17,899 homes were sold with a median price increase of 21.5%, ending at $460,000. We ended 2021 with gains in employment and an annual growth rate of 4.7%.

These stats are a few months old, but they're extremely accurate. In the 1990s and in 2006, we led the country in price increases. But Utah has never seen anything like what we saw last year. We were at 28.3% at the third quarter of 2021. If you're to compare us to the other metros in the US, home prices have increased by more than 600% since 1991. That's two and a half times the national average. And home prices have increased nearly 85% in just five years. And if you look at the price of homes in the Salt Lake Metro compared to the US, just before the recession in the first quarter of 2007, the median price was nearly $207,000. That ranked Salt Lake number 53 out of 183 metros nationwide.

By the end of the third quarter, in 2001, Salt Lake was 24th sitting at $500,000, making Salt Lake homes higher priced than 87% of all metros. In Utah, we have about 700,000 owner-occupied units and 300,000 renters. In the last year alone, home price have increased from approximately $439,000 to more than $556,000, creating a ton of wealth for homeowners while renters get nothing. As a matter of fact, renters lost money paying someone else's mortgage.

Home Owners More Wealth Graph

A few years ago, the Federal Reserve put out this chart that shows that homeowners have 40 times more wealth than renters. After this huge run on housing, it's certainly a lot higher now. When you buy a house, your monthly payment will stay the same for 30 years. But once that house is paid off, you'll no longer have a payment for the rest of your life, barring taxes and insurance. Rent often increases year after year. Renters are paying about 18% more this year than they did a year ago. Due to the lack of available homes and rentals, the cost of rent should continue to climb. Just one more reason you should consider purchasing a house now, that is, if you can afford one. The longer you wait, the more money you'll throw away on rent, and the more money you'll pay for your house. With prices and mortgage rates increasing, the monthly cost to purchase real estate is escalating. Waiting even just a few months could cost you tens of thousands of dollars over the life of your loan.

Only Buy a Home If you Can Afford it

But you should never buy a house if you're not financially stable. Homeownership has substantial financial benefits that renters don't receive. For a lot of homeowners, the equity bill over 30 years allows them to retire early and to a location they prefer. But some of the best benefits of homeownership aren't financial. There are loads of reasons why owning a home is better than renting. If you're currently paying rent, make sure you watch Buy Vs. Rent. I'll put a link to that video below.

Is Utah in a Housing Bubble?

As I mentioned, the 2022 housing market has been sizzling. But things could be changing. Unfortunately, data and statistics are about one month behind. But for the first time in a few years, the housing market is starting to ease a little as of May 2022.

I did not say that the housing market is going is in a bubble or that the housing market will crash. As previously mentioned, homes should continue to sell, and prices should continue to climb, but at a much slower rate from here on out. Sellers, including home builders, are still trying to max out the sales price. You can't blame them, but buyers are finally starting to push back, refusing to pay the bloated listing price. As sellers reduce their prices to get in line where pricing should have started, it confuses a lot of people. The reduction of a list price is not the same thing as declining home values. For accurate numbers, you need to compare the price that a home sold for today to what a similar home sold for in the last year or month. When you run the numbers correctly, home prices are clearly still trending up. Though the fact that home builders and sellers are having to reduce their inflated listing price is one of the first signs that the market might be changing.

I feel like we are approaching a price ceiling where enough people will no longer be able to afford to pay what the sellers are asking. But because we're in such a severe housing shortage, current trends will continue, but at a slower rate for the remainder of 2022.

I still recommend that you buy a house because interest rates are expected to keep climbing. Where they'll end, no one knows, not even the Fed. Some have predicted that rates will hit 6% by the end of this year. After the monstrous increase that we've already had this year, it's hard to believe, but it seems like anything's possible in this crazy market.

But I can confidently say prepare for a market shift. I think it's already happening. The days of 12 offers for $40,000 above the asking price will soon come to an end. But still, we are nowhere close to a buyer's market. The change will happen slowly, but it will happen.

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