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SALT LAKE CITY — Home prices in many counties along the Wasatch Front jumped double digits in the third quarter of 2018 when compared to the same time last year, according to the Salt Lake Board of Realtors, adding to the worry that first-time homebuyers are being priced out of the market.
The median price for single-family homes climbed 14.6 percent in Tooele County, 11.3 percent in Utah County, 10.9 percent in Davis County, 9.6 percent in Weber County, and 9.2 percent in Salt Lake County.
“Strong demand for homes is being driven by new household formations and net migration,” board president Adam Kirkham said in a press release. “This has created a housing deficit that continues to push prices higher.”
The shortage of housing units means intense competition for entry-level homes. Just ask the Di Fini family who spent the past three years looking for a home.
“We chose Utah because we have family here,” Katrina Di Fini said, “but we knew living here in Utah meant that we’d have to struggle financially.”
With three kids, the Di Finis had a few items on their house-hunting wish list: a safe neighborhood, a garage, and a yard with a garden. They started out looking in Tooele in 2015, but went back to renting for a year after dealing with rejected offers and a lack of affordable options.
“You just kind of feel like you’re in the dark and you have no control,” Di Fini said of the home-buying process.
The family changed realtors several times and ended up working with Amy Wilson this year.
“It really has caused a frenzy for a lot of people,” Wilson said, of the current housing market.
Average homebuyers can’t compete with out-of-state buyers with more purchasing power, Wilson said. Also, houses for first-time buyers have all but disappeared in the Salt Lake and Utah valleys.
“You’re looking at $350,000 to $400,000.” Wilson said about entry-level home prices. “You’re looking at a $2,300 mortgage payment. That’s a lot for a small family. Especially with young kids.”
Rising home prices
In 2004, the median sales price for a single-family home was $160,000 in the Salt Lake metro area, according to the University of Utah’s Kem C. Gardner Policy Institute. Fast forward to September of 2018, and the median sales price has more than doubled to $347,000.
“Our incomes aren’t keeping up,” said research analyst Dejan Eskic, who works at the policy institute.
Eskic helped author a May 2018 report titled “What Rapidly Rising Prices Mean for Housing Affordability.” The analysis predicts that if trends from the last few decades hold, the median home price along the Wasatch Front would be $1.3 million by the year 2044.
Eskic describes it as the perfect storm: rapid population growth, a booming economy combined with a housing shortage.
“It’s supply and demand,” Eskic said. “We have a lot of demand and not enough supply to fill it.”
Builders played it safe after the recession and now we’re short 43,500 housing units and it’s unlikely we’ll catch up soon. To find enough employees, homebuilders are competing with large construction projects — like the new airport.
“Everything that goes into building a house is getting more expensive,” said Eric Allen, regional director for Metrostudy, which tracks Utah’s homebuilding industry. “We’re building like crazy; we can’t keep up with demand right now.”
Allen said the housing market is much healthier and stronger than before the mortgage meltdown a decade ago. Also, the demand for housing looks to continue for years to come because of Utah’s booming economy and growing population.
“We’ve got 20,000-to-30,000 people moving into this market every year,” he explained. “We’re creating 30,000-plus jobs a year.”
Allen’s newest numbers show nearly 70 percent of homes being built right now are priced above $300,000.
“Our kids are growing up here, our grandkids are growing up here and we want them to stay here,” Allen said. “But we also want them to be able to afford a home here.”
The lack of affordable housing, he said, could soon become a real threat to our economy.
“At some point, those companies are going to say, ‘Salt Lake is no longer affordable, so we’re going to look elsewhere,’” Allen said.
Some of the blame can be placed on local zoning restrictions that won’t allow for high-density housing.
“We’re not able to build smaller homes or on smaller lots,” Allen said. “So density is becoming a real issue here.”
Not in my backyard
In the University of Utah report, Eskic and his co-authors cite zoning ordinances and “Nimbyism” (a term for opposition resulting from a “not in my backyard” mentality toward certain developments) for driving up costs and constraining the housing supply.
“If land prices keep going the way they are, the only way we’re going to get something built is if we dense up,” Eskic said. “We have to accept some changes if we want the future generations to have a similar quality of life that we do.”
“There’s only so much earth that we have,” said Sean Steiman, a realtor and land developer.
Steinman points to a new development in Millcreek as part of the solution. It’s a piece of land that used to have only one house. Soon it will have housing for ten families —thanks to twin homes that maximize the space.
“We did this outward (expansion) and now we’re filling back in and going vertical, as well, the closer that we’re getting to downtown,” he explained.
This type of infill project, Steinman said, is a way to answer the demand for more affordable housing. While some pushback at higher-density housing developments in their neighborhoods, Steinman believes it can be done the right way.
“I see it as a positive thing,” he said. “It’s progress in the city as long as we are intentional in what we are doing.”
“There were some tough moments,” Di Fini said of her family’s housing search.
Utah’s current housing market is forcing families to make some difficult compromises.
“One of the things we decided to change was looking out farther and looking for a smaller home,” Di Fini said,
The Di Fini’s quest for a home took them up and over Point of the Mountain and into Eagle Mountain, even though it meant an hour commute each way to work in downtown Salt Lake City. Instead of a house, they purchased a three-bedroom condo.
“When we walked through it the first time, I fell in love with it immediately,” Di Fini said. “I remember walking through here and then the kitchen, this kitchen is the best kitchen I’ve had so far.”
They made the right decision, according to their realtor.
“In this market, you just have to be a realist,” Wilson said.
She urges families to not get into trouble and allocate too much of their income to a mortgage payment.
“If you need to get into a condo, if you need to get into a townhome, there’s nothing wrong with that,” Wilson said. “Get into it for a couple of years and then rent it out.”
Since ownership was the ultimate goal, the Di Finis are happy to finally be building equity.
“It felt so nice to sign and just close, and know that we were finally buying something that was like an investment for us,” Di Fini said.