SALT LAKE CITY — The cost of homeownership in the Salt Lake City metro area is likely to rise to record levels in 2020, a new forecast predicts.
James Wood, Ivory-Boyer senior fellow at the Kem C. Gardner Policy Institute, said the median sales price of a single-family home will rise 5% to register at $400,000 for the first time, while the median price for condominiums/town houses will climb 10% this year and could reach the $300,000 milestone next year.
He noted that last year the median sales price of single-family homes in Salt Lake County was $380,000, which was a 91% increase from 2011 — the year prices ended their decline following the Great Recession. Utah housing prices have jumped significantly over the past seven years — up 67% statewide, he said.
“A lot of people don’t have much choice in the housing market,” Wood said. “The alternatives are pretty limited, particularly if you’re moderate income.”
He said changing demographics, a strong job market and a robust economy have contributed to the rising housing costs — a matter that is already affecting affordability for Utah households.
“Since the end of the Great Recession, a shift has been underway in housing demand,” Wood said in a report presented to the Salt Lake Board of Realtors Friday at its annual Housing Forecast Breakfast. “This shift reflects the homebuyer’s preference and need for more affordable housing.”
The median sales price of a condominium/town house in Salt Lake County rose 10.6% in 2019 — the third straight year of double-digit increase, the report stated. Last year, the median sales price of those units was $275,000.
The median sales price has climbed from $144,000 since 2012 — an average annual rate of increase of 9.7%. Since the Great Recession, prices for condominium/town homes have risen faster than prices for single-family homes, he said.
Wood predicted this year, the total number of home sales in Salt Lake County should reach around 18,000 units, comprised of approximately 13,000 single-family homes and 5,000 condominium/townhomes. Unfortunately, the prices increases will likely continue for the foreseeable future, he added.
“Economic growth, demographic growth and on the cost side with land, it’s just inevitable. You’re going to get a lot of upward pressure on prices,” Wood said. “There’s no way to avoid it.”
To address the increasing cost issue, he said some developers are moving toward building more affordable products — under $350,000 in outlying locations where land is less expensive.
“Those are in (places like) Saratoga Springs, Eagle Mountain and Lehi,” he said. “These are very small lots — they’re detached, but there’s only a few feet between each home.”
He added that similar development is taking place in western Salt Lake County as well as western Davis and Weber counties.
He said some cities are fighting against high-density units and smaller lots, but others are capitulating, which is offering a solution to the growing affordability problem.
Wood said for those already in the homeownership market, they should expect to build a lot of equity in the coming year, but for those on the outside — the market will be particularly challenging. He said the rising costs is also making affordability difficult for renters as well who struggle to find units that won’t bust their budgets.
”So the people who aren’t in the homeownership market just get left behind. It’s painful,” he said. “(There are) millennials (with) graduate degrees, professionals, and one of the problems is they want to live in Salt Lake City and even Rose Park is pretty expensive, so they just get discouraged. It’s tough. It’s really tough.”