If soaring real estate prices and loosening credit restrictions are giving you Great Recession flashbacks, you are not alone. It’s been almost 10 years since the devastating housing bubble burst and at first glance superficial indicators suggest that history might be about to repeat itself. But don’t be fooled by appearances. A closer look at economic indicators show today’s market distinguishing itself from the pre-crash market of 2008. Here is why forecasters continue to expect a bullish Salt Lake County real estate market in the foreseeable future.
Demand for New Homes Outpacing Supply by 35%
Utah is in the midst of a housing shortage. According to James Wood, Ivory-Boyer Senior Fellow at the Gardner Institute, the increase in households has exceeded the number of new housing units for the first time in forty years. In March, the Deseret News declared this shortage to be “teetering…on the realm of crisis.” As new home deficits continue to fall to record lows, it is impacting all aspects of the housing market.
More People, More Jobs, Higher Home Prices
According to the latest US census, Utah is now the fastest growing state in the nation and the Wasatch Front is expected to grow by 86% before 2050. Salt Lake County is projected to remain the most populous in the state, reaching nearly 1.7 million people by 2065. In the past year, Utah has seen job growth in almost every category and it looks like it will keep trending upward. Utah’s unemployment rate is also one of the lowest in the nation. Wood believes this wave of new residents will only accelerate demand for housing and increase prices in the housing market going forward. Home prices in Salt Lake County have already reached an all time high. In the second quarter, the median single-family home price climbed to $330,000, a 29% increase compared to the previous peak in 2007 when prices topped $256,000. Even after adjusting for inflation, home prices today are 10% above the previous pre-recession peak price.
Regulations in 2018
It is true that mortgage companies are beginning to loosen their reins on credit restrictions. But with the advent of CFPB and Dodd Frank, banks are required to prove each client can repay their loans. Only ½ of 1% of all home loans foreclosed in Utah in the past year and delinquent loans are trending downward. And, despite three small rate hikes from the Fed, rates have stayed flat or even lower due to low inflation and other economic factors.
It is only natural that we look to the past before betting on the future. The financial lessons learned from the Great Recession, and the preceding housing bubble, should be seared into all of our memories. That being said, a real estate investor should feel confident about the future of the Salt Lake County market. Even with home prices in Salt Lake County at an all-time high, Millennials are starting to show considerable interest in homeownership, baby boomers are downsizing (and upsizing) and a robust economy means everyone in the middle is ready to scale up or buy a home for the first time. Home appreciation is projected to rise another 4-6% over the next few years. 2018 looks to be a good time to be a homeowner, and a good time to buy.
Part of this article was derived from the September 2017 Salt Lake Realtor magazine, “Demand for Housing to Accelerate” by Troy Peterson.