SALT LAKE CITY — When Stephanie Pass and her young family began looking for homes in Salt Lake and Utah County they didn't expect to run into so many roadblocks.

Finding a home that fit within her family’s budget and in an area they wanted was problematic. The few homes within their price range that were on the market did not stay there long, and there were multiple offers almost instantly.

“When a house comes up I see that I like, we get there right away and put an offer on it the first day on the market,” she said. “By the end of the day, there are already three or four other offers on it.”

A study released Monday by the Associated Press pulled housing data from a five-year period from real estate websites Trulia and realtor.com. The data showed a growing shortage of affordable housing available in Utah. Similar to Pass' experience, finding a home for many homebuyers in the state has become a never-ending battle.

Utah is one of the fastest-growing states in the nation, but a shortage of housing and rising home prices make it increasingly difficult for prospective homebuyers to find affordable housing.

In 2016, Utah surpassed 3 million people in the state, and had a stable, yet flourishing, economy. With this growth came some growing pains: Utah continued to see home prices increase while the number of homes on the market dwindled.

Between 2012 and 2017, Salt Lake City saw a 69.5 percent drop in housing inventory over the five-year period, according to data released by Trulia and compiled by the Associated Press, which is the largest drop in inventory percentage in the nation. In other words, in 2012, Salt Lake City had a total of 3,573 homes listed in the first quarter, but in 2017, that number dropped to only 1,089.

In a similar study in 2016, Jim Wood, the Ivory-Boyer senior fellow at the Kem C. Gardner Institute at the University of Utah, showed that the five-year period between 2010 and 2015 marked the first time since at least the 1970s that Utah had a greater number of households than housing units, or inventory, available.

In that time period, Utah added 109,321 households but only 81,656 housing units, which is a negative 34.3 percent difference, according to Wood's research. By contrast, between 1970 and 2010, Utah had about 11 percent more housing units than number of new households.

Historically, the smallest difference between the number of households and available housing units was between 1970 and 1979 when there was a 4.7 percent difference. In the '80s, Utah had the highest positive difference at 22.5 percent, which meant there were many more housing units than available households. But at no point until between 2010 and 2015 had housing units ever dropped lower than the number of households in the state.

Wood said Utah used to be considered a starter home market, but now first-time home buyers are either choosing to stay in rental units or with family members — to avoid paying ever-increasing prices to an already depleted market — or are forced to pay more money to get into a single-family home.

In Salt Lake County, housing prices have increased over the last three years, with 2016 seeing the largest growth at 8.1 percent, according to a separate study conducted by Wood and commissioned by the Salt Lake Board of Realtors. The two years before that saw an increase of 6.7 percent in 2015 and 4.1 percent in 2014.

Wood said that the 8 percent increase is "particularly noteworthy" because it drove up single-family home prices to $295,000, which was "slightly above the previous record high of $290,000 in 2007 (when adjusted for inflation)."

Additionally, the market has shifted to where only 15 percent of all listings in Salt Lake City are classified in the starter home range, according to the Trulia data. By comparison, five years ago, starter homes in Salt Lake City made up 27.7 percent of the total inventory.

“Right now, if you really wanted affordable housing, that is if you wanted to buy a new home and you just got out of school and you’re making $60,000 a year but you want a new home, you’d be hard pressed in Salt Lake County to find anything affordable,” Wood told KSL.com.

Someone at this level of income might qualify for a $275,000 mortgage, he said, if they had no lingering student debt. Even then, he said, the options would likely be limited.

"It would be hard to find a new home for $275,000 without going to Tooele, without going to Eagle Mountain or without going to a place like Clinton or Syracuse,” he said.

Between 2012 and 2017, homes in Salt Lake City that were categorized by Trulia as starter homes jumped up in price, according to the median home listings, from $114,400 in to $179,950, while trade-up homes, or homes purchased after a starter home, jumped from $179,600 to $257,916. Homes categorized as premium homes shot up from from $319,617 to $485,883.

Similarly, housing prices are increasing among all home classifications nationally. For starter homes, the average cost nationally was $103,518 in 2012. By 2017 that cost had risen to $145,025. Trade-up home costs went from $187,430 to $254,315 in that same time period, and premium homes jumped from $376,682 to $521,477, according to the Associated Press analysis.

This shows that housing shortage isn’t isolated to Utah alone. In fact, the housing shortage is a national problem with no immediate end in sight.

The struggle to get into a home

The housing market, as it now stands, is a seller's market where listing prices become the starting point for a bidding war with several potential buyers. In almost every case, homes are selling for more than original asking prices. Buyers are increasingly under pressure to accept whatever demands the seller has, including closing costs and buying the home as is, Wood said. The Associated Press study showed similar findings.

People moving into the state may have an increasingly difficult situation on their hands when they see prices for homes that are far more than what their homes sold for in another state.

Michele Allen decided to move closer to family, so she sold her 1,200 square-foot home in El Paso, Texas, for $80,000, just $4,000 short of the price of a median starter home in the area in 2017, according to the Associated Press analysis. However, when she arrived in Utah, homes were listed for almost four to five times more than what she sold her house for in Texas.

“We’ve been looking at houses, and I think the cheapest one we’ve come across was $280,000 something,” she said, speaking about the house she’s looked at in the Davis County area. “We’re not even looking at new houses; new houses are $370,000 to $380,000, and that’s just for a three bedroom. I’m not looking for anything enormous, but I do want something nice.”

Allen said she’s looked at senior communities and townhouses, but they are not the type of housing she wants to end up living in, so she’s living with her sister and brother in-law until she can find an affordable home.

“It’s kinda scary when you’re older and trying to buy a home,” Allen said. “If I was really young and had 30 to 40 more years I would say let’s do it. It’s hard to have house payments. My house was paid off a good 20 years before I moved here.”

Cause of the housing shortage

Many factors led to the shortage in housing inventory in Utah, Wood said.

For one, builders are struggling to keep up with the number of people moving into the state. There are simply not enough construction workers available for builders to keep pace with the demand, he said.

Additionally, land cost, land availability and zoning have made it so builders need to be more creative with where they develop.

Prospective homeowners looking to remain within traditional city limits will continue to struggle with the scarcity of homes while facing increased home prices; however, others may choose to move a considerable distance away from major cities to find more affordable housing.

Wood said in the late 1990s, rising interest rates forced developers to build outside of Salt Lake City to areas like Tooele, Eagle Mountain, Saratoga Springs and Herriman. These areas saw significant growth but were well outside traditional city limits where most of the real estate demand had been.

Herriman remains one of the fastest growing communities in Utah, Wood said, with construction in the city at a statewide high. But the city is a considerable distance outside the Salt Lake City limits and requires a longer commute for residents. Additionally, Herriman, like most cities around the state, faces increasing home prices and a shortage of inventory.

In February 2017, Herriman had a 7.8 percent price increase since last year at the same time, according to the realtor.com data, which broke down housing availability in the state by zip code. Homes in Herriman have some of the shortest lifespans on the market in the state — 43 days — and a median home listing of $354,600.

Some builders may also work around high land prices by developing high-density living areas, such as apartments of condominiums, Wood said. High density developments can pack people into an area, but do little to help the single-family housing market.

“People have got to have a place to live,” Wood said. “What are your choices? The existing home market, which is already built and are used homes; second, a new home market; third, is the apartment market.”

What can buyers do to be more marketable to sellers?

There is no quick fix to getting into a home. However, Chris Buckway, a mortgage professional from BeamLending and a Utah Association of Mortgage Professionals board member, said a few things can help buyers become more marketable to sellers.

1. Begin the underwriting process before finding a home. In addition to hiring a real estate agent, Buckway said having a mortgage professional begin the underwriting process will help show sellers that “you can close quickly and they can know for sure that (the sale) is not going to fall through.”

The underwriting process, he said, helps the buyer get one step closer to closing on a sale before an offer is even submitted. The lender will collect several financial documents to get a final approval.

Once the underwriting process has been completed, the real estate agent can include that in the offer, showing that everything has been taken care of except for an appraisal.

2. Find a mortgage professional who is flexible. With the ever-increasing cost of housing and a shrinking inventory, Buckway said it’s important to have a mortgage professional who is willing to work after hours to help with putting an offer on a house.

“Often you will go see homes with your real estate agent after (regular business) hours and when you find that perfect home, you might want to get your offer immediately before other offers come flooding in,” he said. “You will want a mortgage professional who can send your real estate agent an updated pre-approval letter so they can submit the offer right away, even the same night.”

3. Apply for the best loan you can qualify for. Buckway said some sellers will only look at buyers that have a conventional loan, or a loan not backed by the United States government. Traditional conventional loans, as opposed to FHA loans which are backed by the government and typical for first-time home buyers, need a 20 percent down payment. But there are exceptions, Buckway said.

“There are conventional loans out there that require only 1 percent down,” he said. “Do some research and find a broker who can be flexible to your situation and get you the best loan possible.”

Although the above suggestions are not going to guarantee an easy experience looking for a house, Buckway said “it’s going to give you an advantage.”

And for some, persistence, a good realtor and a compelling story make all the difference.

Pass recently went under contract for a home where four other families were involved in a bidding war for the house, but she said she was forced to be “incredibly aggressive” in watching the market, which included checking several real estate apps every hour.

Although it took several attempts to finally win the bidding war, Pass said it was her realtor who went “above and beyond” who ultimately made the difference in her family being selected by the seller.

“He wrote a little story about us and our family and our situation and how we’ve been living in this tiny place, saving money and that we have a kid on the way,” she said. “That’s what got us the house.”

Related topics