SALT LAKE CITY — They went through the pain 10 times.
Ten times, Matthew and Bethany Clewett found a house they could envision themselves making their home, where they would raise their now almost 1-year-old daughter, Nellie. Ten houses they liked enough to put in an offer.
But each time, one by one, their offers were passed over. One after another, the young couple started to lose hope, getting increasingly frustrated with each rejection. Even though their "bulldog" of a real estate agent was persistent and aggressive, each time they lost, and it became increasingly heart-wrenching.
And they weren't picky. They were willing to buy anywhere along the Wasatch Front — an area of between 80 miles and 120 miles in length, depending on which northern and southernmost communities one claims. They were open to buying in Stansbury Park in the west, to Saratoga Springs farther south, to Syracuse up north.
They were offering above asking prices — $20,000 to $30,000 over. They were competitive bidders, but in some cases not competitive enough. Matthew Clewett — who himself is a housing wonk as the public policy director for the Salt Lake Board of Realtors — said their real estate agent told them one house they lost out on went for $60,000 to $70,000 over asking price. That's not even the highest some Salt Lake real estate agents have seen in other cases, with some bids up to $100,000 over asking price, though that's not too common.
"It was absolutely insane," Matthew Clewett said.
Again and again, it wasn't enough.
"There were plenty of times where we were really frustrated with the process, being denied and having been told, 'Hey, you had a great offer but we found a better one,'" Matthew Clewett, 26, said, "I wouldn't wish it on anyone."
"And then it's just like the thought of, 'Well, should we just give up?'" said his wife, Bethany Clewett, 27. "Should we just live in my parents' basement forever?"
The Clewetts' struggle to buy a home is what thousands of Utahns have already faced in 2021 — a year that's already shaping up to be one like no other for real estate in Utah, on the heels of an already record-shattering year for Wasatch Front home sales in 2020.
"It's absolutely unheard of," Dave Robison, president of the Utah Association of Realtors, said about Utah's record-breaking housing trends. "I mean, it's insane. It's crazy. It's unprecedented."
Consider these figures from the Salt Lake Board of Realtors:
- Wasatch Front homes were on the market a median of five days — a slim five days — in the first quarter of 2021, a huge drop from 28 days in the first quarter of 2020. Buyers are now having to make one of the biggest decisions of their lives in a matter of hours — without the luxury of waiting a few days before deciding to submit an offer.
- The year 2020 shattered records for home sales in Salt Lake County, Utah's most populous county. In the year of the pandemic, a whopping 19,194 Salt Lake County homes sold, breaking the previous all-time record of 18,907 homes in 2005, before the market crashed and sent the U.S. spiraling into the Great Recession.
- Wasatch Front home prices are skyrocketing by double-digit percentages. In Salt Lake County, the median single-family home price climbed to $468,000 in the first quarter of 2021, up $68,000 or 17% from a year earlier when the median price was $400,000. In Utah County, that price is up to $450,000, up an even bigger 20% from the first quarter of 2020. In Davis County, that price is $430,000, up 21%. In Tooele County, it's up to $360,000, up 18%. And in Weber County, it's up to $340,000, up 23%.
- Meanwhile, inventory is struggling to keep up with demand. Across Utah's five-county Wasatch Front, there were 7,703 overall home sales of all housing types in the first quarter of 2021, down from 7,978 sales in the first quarter of 2020. In Salt Lake County, single-family home sales were down 1% year over year. Tooele County sales were down 4%. Utah County saw a bigger fall in sales, down 7%. In Davis County, an even bigger drop of 16%. Weber County, Davis County's northern neighbor, saw the biggest decline at 18%.
- With demand at an all-time high, buyers are getting increasingly aggressive. Some Salt Lake real estate agents have seen home offers up to $100,000 over asking price. Bidding wars are now the norm.
Now zoom out.
The housing market is red hot just about everywhere in the U.S., still boiling over in wake of the strange year that will forever be marked by the COVID-19 pandemic. But the Beehive State in particular — a state that, even before the pandemic, not only ranks high in population growth, economic health and low unemployment rates, but is also seen as an attractive place to live due to its outdoor recreation opportunities, proximity to world-class skiing and hiking, and a thriving tech sector at Silicon Slopes — ranks high in numerous lists analyzing the U.S. housing market.
Utah, with its Salt Lake metro area, is a contender for having one of the hottest housing markets in the West. Its big competitor is Idaho, which has also seen major housing price increases as more and more people, spurred by the pandemic, moved from big cities — from San Francisco on the West Coast, to New York in the East — in search of homes with more space at much lower price points.
To Robison, Utah's long track record of strong population growth and economic health, even before the pandemic, puts the Beehive State at the top of the list in the western U.S. for its housing market, excluding outlier markets like California.
"I think we're No. 1 in the West," he said, pointing to Utah's top-of-the-nation population growth and low unemployment rates as "big indicators" that also influence Utah's appeal to homebuyers.
- Salt Lake City metro ranks third-highest in nation for housing price increases, with a spike of 15.9% over the past year and 6.5% over the last quarter, according to the Federal Housing Finance Agency. That's behind the Tacoma-Lakewood metro area in Washington, with housing prices that spiked by 16.3%. Boise, Idaho, ranked No. 1 in the nation, with a 23.4% rise in housing prices.
- Now consider more than just housing prices, but also economic conditions. Utah topped Bankrate.com's Housing Heat Index published in March 2021, topping five states the site reported as the having the strongest housing markets in the fourth quarter of 2020. In that ranking, Utah beat out Montana, Nebraska, Idaho and Indiana.
To arrive at that ranking, Bankrate.com's analysis used six metrics from the fourth quarter of 2020 — annual home price appreciation reported by the Federal Housing Finance Agency's Home Price Index; share of mortgages past due as reported by the Mortgage Bankers Association; unemployment and job growth from the U.S. Labor Department; the cost of living index from the Center for Regional Economic Competitiveness; and state-by-state tax burdens as reported by the Tax Foundation.
Utah's home values jumped 15.4% in 2020, third-best among the U.S. states, according to the Federal Housing Finance Agency. Utah also had the second-strongest job growth in the nation from December 2019 to December 2020, according to a Bankrate analysis of Labor Department data. Plus, Utah's tax burden is among the lowest in the nation, according to the Tax Foundation.
The high rankings of states like Utah, Montana and Idaho, Bankrate.com reported, demonstrates a housing market "shift" happening in the West.
"The prominent rankings of states in the Mountain time zone illustrate a shift in the housing market: Americans are still drawn to healthy labor markets, but even before the coronavirus pandemic, they were growing, less willing to pay up to live in places like San Jose, Seattle and Boston," Bankrate.com wrote. "COVID-19 has pushed many — especially those who can work remotely — to leave the priciest areas for more affordable regions."
- Meanwhile, Utah's population continues to boom, mostly thanks to its higher-than-the-national-average birth rate, but also because more people are moving in. Utah ranked as the fastest-growing state in the nation according to the 2020 census released in April, which showed the Beehive State grew 18.4% over the past decade, beating out Idaho, Texas, North Dakota and Nevada in the top five in terms of percentage growth.
Even though the U.S. population growth remains sluggish, Utah and Idaho are two Western states that have bucked that trend. Births were the biggest growth driver in Utah, while a majority of the growth seen in its northern neighbor of Idaho, about 60%, was driven by people moving into the state between 2010 to 2019, according to the Census Bureau's American Community Survey. One in 5 of those came from California, many of them retirees seeking lower housing prices and a home among Idaho's pristine wilderness areas.
But that's not to say out-of-state movers aren't coming to Utah, too. Net migration accounted for 35% of Utah's growth, totaling 177,242 people between 2010 and 2020, Mallory Bateman, a senior research analyst and state data center coordinator at the University of Utah's Kem C. Gardner Policy Institute, told the Deseret News in April.
One metro area in Utah in particular saw a big jump in migration from out of state amid the pandemic, putting Utah on the national map on another list.
- Utah's Heber City area ranked No. 5 in the nation out of The New York Times' list of 926 metro areas with the biggest change in net in-migration in 2020. Heber's net in-migration was up 4.7% in 2020, according to The New York Times analysis titled "How the Pandemic Did, and Didn't, Change Where Americans Move."
An 'explosion' in the West
The story of the West's housing market is one of growth — while other areas of the nation begin to stagnate or "drain," as James Wood, the Ivory-Boyer senior fellow at the University of Utah's Kem C. Gardner Policy Institute, put it.
"If you look at population change, and the same with employment growth, the country is really draining from the center to the southeast," Wood said. But if you look to the West — Utah, Colorado, Idaho, Arizona, Oregon and Washington — "that's where the growth is."
Now factor in Utah's continually high population and economic rankings for at least the past decade, Wood said it's no wonder the state is seeing a booming housing market, which was only accelerated by the pandemic.
"When you're leading the country with that kind of growth, there's no way you're going to avoid pressure on the housing market," Wood said. "And that's what we've seen."
Though out-of-state movers don't statistically make up the biggest chunk of growth in Utah, it's still happening. Anecdotally, real estate agents report a big uptick in interest from out-of-state buyers, especially in the past year, who view Salt Lake's rising housing prices still a steal compared to what their dollar would buy them on the West or East coasts.
"I'll tell you this," Robison said. He noted the website UtahRealEstate.com had about 500,000 people based in California browsing the site last year. "We don't have that many homes for sale, but we had half a million looking from California. Half a million."
Missy Coman, an Idaho real estate agent of 12 years, described what she's witnessed in her state — and what's gone on in other metro areas like Salt Lake City — as "just an explosion."
"Inventory is low and demand is high," she said simply, describing how homes in the Boise area are often selling 10% to 20% over asking price.
Affordability is one of the big factors that's fed Idaho's housing market and why it's such a close contender to Utah. But now, since Boise ranked No. 1 in the nation for spiking housing prices, with a 23.4% increase in the last year, that's changing.
"I think we're now on par as far as affordability for everyone," Coman said. "Whereas before we were more affordable, but the way the market has gone we are now more on par."
Like Salt Lake City metro area, the Boise metro area has similar draws. To Coman, the biggest draw is the great outdoors, its climate, and plenty of land. But Idaho is also similar to Utah in culture and lifestyle.
"What has made both Salt Lake City and Boise so attractive is they are wholesome cities," Coman said, pointing to their generally low crime rates and welcoming communities.
But the housing frenzy has resulted in all kinds of new pressures, from the homebuilder to the buyer. And while it's certainly a seller's market, sellers still have to navigate a sea of buyers whose financing may fall through because in their desperation they've stretched to an offer they can't feasibly manage.
"It's hard on everybody," Coman said. "It really is."
The buyer's battleground
The Clewetts eventually did find their dream home.
Bethany Clewett found it first on UtahRealEstate.com. It was a cute, updated three-bedroom, 2 3⁄4 bath, nearly 2,300-square-foot home in a charming Kaysville cul-de-sac. It already had a lush lawn, landscaping and a new deck in the backyard. The kitchen was remodeled, with white cabinets and a large window above the farmhouse sink. The walls had fresh coats of gray paint.
And their daughter's upstairs bedroom window would have a beautiful view of the mountains.
It was perfect. But it wasn't the first time they'd walked into a home, thought, "This is it," only to end up losing it.
"There was one in Bountiful that I loved," Bethany Clewett said.
"Yeah, and that one probably went for $90,000 over asking," Matthew Clewett said, laughing.
When they lost the Bountiful home, they said no tears were shed, but they were certainly frustrated and angry.
"But I also think we knew something better would come along," Bethany Clewett said.
"We had faith that we would keep finding good properties," Matthew Clewett said. "And we did."
But it didn't come without willingness on their end to widen their price range.
Originally, the Clewetts wanted to find a home priced in the high $300,000 range. "But as we were searching, we realized it wasn't going to work out for our situation," Matthew Clewett said.
"There were very few and far between," Bethany Clewett said.
So the Clewetts made an aggressive offer on the Kaysville home. They offered $30,000 over asking price, putting their bid in the mid-$400,000 range.
"Which is, you know, it's a stretch," Matthew Clewett said. "But in this market you've kind of got to stretch a little bit."
Their offer included an "escalation clause," he said, where they included a provision in their offer to beat any other offer by $500 up to a certain amount.
When they submitted their offer, Bethany Clewett said she was "more optimistic," while her husband didn't want to get his hopes up. "He was like, 'We're not going to get it,'" she said, laughing. Matthew Clewett laughed, too, explaining he prefers to brace himself for the worst.
But they got the house. Even though they were thrilled, the young couple still held their breath for the next step: the inspection. It passed with flying colors.
"We took a sigh of relief," Matthew Clewett said.
Next came the mortgage process. They got a mortgage rate at 2.99% — and they were able to move in.
"We decided to stick with it. We were very persistent. And I think you have to be very persistent in this market," Matthew Clewett said. "You're going to be let down a time or two. You're going to find a house that you think is perfect for you, and you're not going to get it, unfortunately. But you're going to eventually find something."
Matt Ulrich, president of the Salt Lake Board of Realtors, said Utah's housing market has shaped up to be "one of the toughest, most difficult markets we've ever been in."
It's now the norm for home sellers to field at least a dozen offers on homes, Ulrich said. Wasatch Front real estate agents have even seen some offers $100,000 over asking price, though that's not too common. However, he said winning offers are now pretty much always over asking price, and buyers are having to get increasingly "more aggressive and more creative" as far as waiving contingencies.
"It's the most challenging market that I've witnessed, and I've seen it across the board," Ulrich said. "It may be hot, but it's not easy."
The dark side of a hot housing market
Utah's red hot housing market is a great indicator that shows "we've been doing things right," Robison said. "It's validation that we're doing awesome and we've created an awesome lifestyle in Utah."
It's the state's low unemployment, diverse workforce — boasting not only a growing tech sector, but also lots of other types of jobs, especially manufacturing — proximity to hiking, biking and skiing, Salt Lake City's cultural diversity alongside plenty of quiet suburban neighborhoods, that makes Utah an attractive place to live, Robison said.
"They want to feel like they're in a good community that's safe. Low crime. They want to feel like they're in an area with good education, job availability, affordable housing."
But that's the clincher: affordability.
There's an obvious downside to it all. As Utah's market booms, its affordability declines. More people will be priced out, now realizing they're unable to afford the same type of home that might have been in their price range just three to five years ago.
A striking 80% of Utahns said in a recent Deseret News/Hinckley Institute of Politics poll they're concerned about Utah's current housing market, with 47% who said they're "very concerned" while 33% said they are "somewhat concerned." Of those, a whopping 70% said they were concerned about affordability.
"The dark side is more competition," said Nadia Evangelou, senior economist and director of forecasting and research with the National Association of Realtors.
The good news, Evangelou said, construction is up in the Salt Lake metro area. She said building permits rose 9% compared to a year earlier, so the Salt Lake Valley continues to be an area with "great opportunities for homebuilders." She noted that over the past 20 years, the Salt Lake City metro area issued an average of 4,800 single-family home permits in a 12-month time frame, but that's since increased. In the latest 12-month period ending in March, she said that number ticked up to 5,600. So more inventory is coming, and that may help with pricing, she said.
But, for Utahns, especially for those who have lived here their whole lives, it's obvious the state's changing, and won't be the same for future generations.
"It definitely is concerning," Robison said, "and that's one reason why it's important we figure out ways now to (address affordability). And if we're doubling our population in the next 40 years, the worst thing we can do is have sprawl."
Robison said Utah leaders must plan for affordable housing, "which, contrary to what we grew up with, means we're going to have a little more density and we're have to do it properly."
No end in sight
Real estate agents and market experts don't see any end in sight for Utah's and the nation's housing boom — and they repeatedly say there's no "bubble" similar to the 2007 market crash that led to the Great Recession.
Leading up to the crash, Robison noted that the U.S. had overbuilt housing and there was a subprime mortgage crisis, depicted in such films as "Margin Call" and "The Big Short."
"Today, we don't have a bubble because we have a lack of housing, and in order to have a bubble we would have to have oversupply. Instead, we have more demand than supply," Robison said. "It's unprecedented. We haven't experienced it before, and so it's just really mind-boggling."
So long as demand continues to outpace inventory, it's likely the housing market will continue on its same trajectory.
"I don't see it changing just because there is so much demand," Ulrich said.
Meanwhile, builders — who are facing spikes in lumber and construction labor costs — aren't keeping up with demand either, Ulrich said. "I've heard they've stopped taking offers because it's costing builders more to build than they anticipate, and they're not sure with COVID and materials being backed up (about) the cost of supplies."
Ulrich said the "only thing" that may slow it down a little bit is if interest rates rise — which Evangelou predicted will happen by the end of 2021, but not by a lot. She said she expects maybe a 3.2% interest rate for mortgages by the end of the year.
But that rate increase likely won't stop people from buying, Evangelou said.
To her, the key to relieving the pressure on the market, is building inventory.
"We need to build even more," she said, "and avoid pricing out homebuyers."