New report sheds light on why Utah home prices are rising so quickly – and it’s not because of a real estate bubble. On the contrary, the rapid increases are the result of a housing shortage and pandemic challenges that have fueled the demand for housing.
The findings are part of a new research report from the Kem C. Gardner Policy Institute at the University of Utah. The State of the State Housing Market report, written by James Wood and Dejan Eskic, details both the history of real estate in Utah as well as current housing conditions in existing markets. , new and rental.
“Our research confirms that Utah is in the grip of a housing shortage, which occurs when the growth of households exceeds the growth of housing units, a historically rare condition in Utah,” said Eskic, senior researcher at Gardner Institute, in a press release on the report. “Additionally, house prices and affordability are likely to be lingering themes for some time to come, but other issues are sure to arise, some unexpectedly, such as a global health crisis.”
Rising house prices
Home prices have skyrocketed over the past year. According to the report, home prices in Utah rose 29% in the second quarter or about 22% after adjusting for inflation. That’s significantly higher than typical Utah housing growth.
Historically, prices for single-family homes in Utah have increased by an average of almost 6% each year, or about 3% when adjusted for inflation.
Northern Utah has also seen rapid price changes. In Weber County, the median selling price has increased 28.5% in the first six months of this year compared to the same period in 2020. In Davis and Morgan counties, the median selling price has increased by 24% and 59% respectively.
The report also looked at cities with more than 50,000 inhabitants. In Layton, the median selling price increased 42% in Q2 2021 compared to Q2 2020. At the same time, Ogden recorded a gain of almost 33%.
This price increase is the result of insufficient supply to meet demand. From 2010 to 2020, Utah experienced a cumulative housing shortage of nearly 45,000 housing units. Even though there has been a record of home construction to help fill this gap, builders have faced many challenges in building units due to supply chain disruptions related to COVID-19 .
In addition, the Federal Reserve’s efforts to prevent a deep, pandemic-induced recession created extremely low interest rates, which fueled a housing boom and rising house prices.
Even with price spikes, the report says a housing bubble is unlikely, as “protracted” housing price declines are still associated with “job losses and recessions,” none of which are expected. over the next few years.
“The most likely outcome for house prices in Utah over the next two to three years is the onset of a period of price moderation,” the report said. “A period of prolonged price declines created by the bursting of a bubble is extremely unlikely.”
Analysts say the forecast for 2022 includes a continued rise in prices, although the gains will be smaller. Instead of 29% growth, they expect the median selling price to rise between 3.5% and 7.2%.
While affordability concerns will pull some buyers out of the market, “demographic tailwinds” will keep housing demand in Utah high. This is because a significant portion of Utah’s population is reaching their peak age for buying a first home. This will keep “housing demand strong for the rest of the decade.”
To learn more about the current real estate market conditions in your own area, contact a Northern Wasatch real estate agent. Find one at NWAOR.com.
Shauna Ray is President of the Northern Wasatch Association of Realtors.