Rapidly Rising Prices Either a Blessing or a Curse, Depending on Your Role
2020 was a banner year for Utah real estate, as the state became one of the fastest-growing housing markets in the nation and a top choice for those relocating amid the pandemic. Thousands left hard-hit major cities, instead seeking out the amenities, affordability, and natural beauty (including the greatest snow on earth) that the Beehive State provides. While local sellers and agents alike could benefit from increased home prices, buyers could face an increasingly aggressive market moving forward and, potentially, even an affordability crisis.
Utah’s Current Housing Market
Utah’s housing market is nothing short of red hot. Exploding demand has resulted in rapidly rising prices, with the average home value increasing 9.9% statewide over the past year and a whopping 13.2% in the desirable Salt Lake City metro area. In fact, Utah topped Bankrate’s Housing Heat Index in December 2020, boasting the nation’s “strongest pace of job growth, along with rock-bottom unemployment, few mortgage delinquencies, and low state and local taxes.”
This desirability has attracted transplants, most notably Californians, in droves. The increased demand, coupled with limited supply due to economic uncertainty, skyrocketed home prices across the state. Agents and sellers alike have brokered some seriously profitable sales, but buyers are facing an uphill battle.
How a Red Hot Market Could Yield a Housing Crisis
Utah’s home and rent prices have long outpaced median household incomes, and inventory was limited even before the pandemic. Rising demand and prices have done little to help the situation as transplants with more disposable income are often able to outbid long-time residents. Inventories of affordable homes will dwindle smaller and smaller until thousands of Utahns are effectively priced out of the housing market. The Salt Lake City metro area alone ranks fourth in housing price increases, and experts characterize the current situation as potentially perilous.
According to Jim Wood, Ivory-Boyer Senior Fellow at the University of Utah’s Gardner Institute and a top economist, “88.0% of all metro areas have housing prices lower than the Salt Lake metro area.” The area has jumped nearly 20 rankings in just a few years, a pace that could be cause for concern. Wood also notes that “it’s tight all over” the state when it comes to rentals, too. He suspects supply won’t catch up with demand until 2022 at the earliest.
Proposed remedies include “changes to local zoning ordinances that control the supply of housing through land use, density and design regulations, which more than any other local policies, govern the annual supply of single-family and multifamily housing.” Mixed-use developments and tax increment financing, where housing projects are funded using anticipated future tax revenue, are other well-documented tactics that could help ease the potential housing crisis. Advocating for equality and affordability in homeownership, however possible, is critical moving forward.
While rising home prices are a sign of opportunity for agents across the nation, it’s important to understand the bigger picture. Healthy supply and demand in the real estate market promotes equity and access in homeownership. As Utah’s economy stabilizes, the hope is the red hot real estate market will continue to simmer without erupting into a full-blown affordability crisis.
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