State of the State | Urban Living
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State of the State

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A new housing study released by Utah's Kem Gardner Institute is about the worst news a potential home buyer or renter could get, as the future of improving Utah's housing shortage is looking very grim. Several key findings will certainly give you a palm-to-the-forehead slap, so make sure you're sitting down and have an appropriate beverage or smoke to dull your reactions.

1. The average home price in the state is now $460,000, and only half of all citizens here can afford the mortgage payment associated with this kind of purchase.

2. It is unlikely that our housing bubble will burst in the next two to three years, meaning inventory for rentals and purchases will remain extremely low.

3. Since 2000, the median sales price in Utah for homes and condominiums has averaged more than 5% growth annually and at this rate, the price of the typical home doubles every 13 years. When the U.S. economic recovery took hold after the 2008 recession, price increases accelerated, averaging 10% annually. Thirteen years later, in the second quarter of 2021, homes saw an unexpected and unprecedented 29% surge in prices—despite the global pandemic and recession.

4. The median sales price of new construction homes is up 13% in the Greater Salt Lake market area.

5. The Gardner Institute found that renters have not escaped the effects of the housing shortage and that vacant units are nonexistent. Households looking to rent face a waiting period—sometimes several weeks—before a vacant unit is available in their desired community. For existing renters, the housing shortage means a rent hike. We're experiencing the first double-digit rent increases for the Wasatch Front counties since pre-Great Recession years. All indicators point to a continued serious shortage of housing in Utah, despite the boom in new residential construction.

6. A huge part of the housing shortage has to do with the global supply chain. For example, Spain, Italy and Lithuania are significant sources of glass and aluminum materials. Germany supplies plumbing materials and South Korea exports heating and air conditioning systems. But by far, the most important global source of building materials is China. According to FW Dodge Data, 30% of all building material imports to the U.S. come from China, including flooring, electrical, hardware and plumbing materials. With the outbreak of COVID, many Chinese manufacturing plants supplying building materials have locked down, disrupting the supply chain and causing building delays and higher construction costs.

So, what do you do if you want to buy? Logic would lead me to suggest you buy or rent something as soon as you can, as prices are going to keep going up due to the statewide shortages. Mind you, I'm a real estate broker so of course I'd recommend those options. But the data doesn't lie. The institute found that many people don't have enough money for a down payment on a purchase, but there are some great no-down loans available out there.