SANDY — While the cost of buying a home in the Salt Lake City metro area is predicted to rise to record levels in 2020, the number of people buying homes is also expected to reach historic levels for the second year in a row.
And the building pressure isn’t just in Salt Lake County, a real estate group says.
“You’re seeing it in the rural areas as well,” Utah Association of Realtors President Dave Robison said. “One of the best performing counties was Box Elder County, their sales went up 15%, and then Summit County went up 15%, Utah County went up 12%.
“One of the interesting statistics right now — this is the first time I’ve ever seen it — but Utah County has more homes for sale on the market than Salt Lake County,” he added.
The Utah Association of Realtors reported last week that homes sales in Utah climbed to a record high of 54,274 in 2019 — the most since the organization began keeping records in 2003, according to Robison. That exceptional sales activity is due to various reasons.
“It’s people moving in from out of state (and) it’s our low unemployment,” he said. “It’s our own population growing. It’s multiple factors.”
He said the high demand has resulted in rising sales prices for properties as well, with the median price statewide registering at $320,000 last year — up 7.7% from 2018. The number of homes sold for less than $300,000 declined 12% because the supply of such properties has dwindled over the years “because they don’t exist; they are disappearing,” he added.
Robison attributed the sales spike in other counties to the fact many prospective homeowners are priced out of the market in some of the more established, sought-after areas along the Wasatch Front.
Utah County has more homes for sale on the market than Salt Lake County.
–Dave Robison, Utah Association of Realtors President
“This is kind of why Box Elder County is booming right now, because of affordability. It’s more affordable,” he said.
The pressure on prices isn’t likely to let up soon.
“Right now, it doesn’t look like it’s going to flatten out at all, simply because we have a shortage of homes and we have a high demand,” Robison said. “The builders are not building fast enough for our demand.”
He said that from 1980 through 2006, local homebuilders “overbuilt” by 10% of what market demand was, however, that isn’t happening in the current market environment. In fact, the Realtor group’s data showed the housing affordability index fell nearly 7% in 2019 to register at 96.
This index measures housing affordability for the region. The report noted that an index of 120 means the median household income is 120% of what is necessary to qualify for the median-priced home under prevailing interest rates. A higher number means greater affordability. The index declined from 120 in 2017 down to 103 in 2018, before dropping to 96 last year.'
Robison added that local municipalities are struggling with meeting the growing housing demand in a climate of ever-increasing home prices. One solution could be higher density units, like twin homes and condominiums, he said.
“The bulk of what people are going to be able to afford is going to be townhomes and condos,” he said. “Because it’s simple, it’s just going to be too expensive to own a single-family home anymore.”
He added that due to construction costs, consumer demand and the land costs, developers may move in the direction of building more townhomes as a way to maintain profitability. He said cities will also have to create building ordinances that support the development of more densely populated housing units, which has not always been popular in many Salt Lake area communities.
Meanwhile, he said if interest rates remain low as they have been lately, then prospective buyers will likely continue to flood the market, which will be good for Utah homeowners who are receiving greater and greater amounts for their properties over the past decade.
“When you look at interest rates, if interest rates go up a point, it reduces (homebuyers’) purchase ability by almost 12%. The interest rates being low, makes it very, very favorable for a buyer,” Robison said. “Now, for sellers, it’s definitely favorable for their selling price because we’re seeing the highest median price range we’ve ever had. So, it’s definitely favorable for them.”