Prices, rates and inventory continue to conspire against Utah first-time homebuyers
While the state did add some housing stock from 2017 to 2022, a recent report from the Kem C. Gardner Policy Institute found new households are anticipated to outpace available units. Only 15% of renters in Utah even have enough money in the bank to buy “a modestly priced $300,000 to $400,000 home,” the report states.
Even with that budget, “it’s very difficult to find anything below $400,000,” said Andra Ghent, a University of Utah finance professor, causing more people to stick in rentals for longer.
In an affordable housing market, the report said “the median income household should be able to afford 50% of homes sold.” In Salt Lake County, only 21% of households can afford a home on the market. And come 2024, the statewide median home price is expected to be $520,000, a high price that the report states “will continue to exclude a growing share of renters from homeownership.”
Paradoxically, Utah realtor Jennifer Salazar has more house listings than buyers right now. That wasn’t the case during the pandemic when homes were flying off the market. She attributes the decline in sales to high interest rates that are “controlling the housing market.”
“I have a handful of buyers who would love to purchase, but because of the interest rate, it's just impossible for them to do so. Especially with first-time homebuyers. They're pretty much out of the market,” she said.
Salazar sells real estate in Salt Lake, Davis and Tooele counties and has found her “niche” in helping first-time homebuyers. She said the situation young couples are in is “very sad” because they’re “motivated to be homeowners.”
The state launched a First-time Homebuyer Assistance Program in July. It set aside $50 million to loan families the cost of a down payment of up to $20,000. To qualify, applicants must bid on a home that is a new build or has never been lived in. The home price tag can’t exceed $450,000.
For reference, the rough average Salazar said the homes she’s listing sell for is $565,000.
Ghent has concerns with the program, including that it doesn’t bolster the existing stock of homes, it just means there will be “more homebuyers competing for the same very small homes.”
To afford a home, Salazar said she’s seeing more multi-generational families split the cost. Kids are either helping their parents buy a home, or they are taking out a home loan together to pay the mortgage.
It’s not just the interest rates keeping people from homeownership, though.
Part of the problem, Ghent noted, is the lack of “starter home” inventory due to Utah zoning laws that don’t allow smaller houses to be built on certain properties.
“The supply that's coming on the market, given the zoning we have, tends to be larger homes and a new home that's built is probably going to be in the $600,000 to $800,000 range,” she said. “It's not feasible for … a young person trying to start a family.”
And the high cost of construction, including material and labor, is complicating things. Ghent said there is a huge shortage of construction workers and it’s causing delays in building inventory. Even if there were a massive overhaul to zoning regulations and more kinds of housing were permitted, “we're not going to see much housing supply come online in the family segment for two, three years,” Ghent said.
Salazar is telling her clients not to give up the dream of owning a home and hopes for a break in the market soon. But she isn’t anticipating a market crash. Utah is no longer “the best kept secret” because “everybody wants to be here.”
“The job market and the housing market, I feel like they go together,” she said. “As long as jobs are doing pretty well, I don't see the housing market changing too much. The demand will still be here.”