Utah was recently crowned the most affordable state in the nation by USA Today. They looked at the cost of health care, gasoline, groceries and the costs associated with home ownership.
Based on mortgage and insurance payments, homeowners association fees, taxes and utilities, USA Today said Utahns spend about 24.5% of their income on those costs. That doesn’t ring true for some homeowners, especially new ones.
Millcreek resident Erin Hardy and her husband are first-time homeowners. They’ve been in their home for about two months and were renters prior to that.
“The peace of mind owning a home is quite lovely,” she said.
Hardy estimates they spent about a third of their income on housing when they rented. But now that they own a home, closer to half of their income goes to housing. She said their mortgage is almost double what they were paying in rent.
“We just are leveraging everything we got,” she said.
To make it work, Hardy said they took their son out of private full-time daycare — “the cost of that is almost a mortgage payment a month,” she said. In addition to a Federal Housing Administration loan, they’re also putting less into their 401k and diverting it into their home because “the equity in your home” is another retirement tool. Hardy said they hope to refinance in the next year to bring costs down.
Hardy feels “extremely lucky” and called it a “miracle” they were able to buy a home at all. While her family found a way to elbow into Utah’s overheated housing market, things should financially even out over time.
Cottonwood Heights mortgage broker Jeff Stout, who bought his first home when he was 19, sees that longer-term play.
“If you buy it right and then just maintain a place, your costs generally aren’t going to be that high unless something unlucky happens to you,” Stout said.
If you own a home, Stout said the percentage of your income you spend on housing tends to go down over time if you have a fixed-rate mortgage and your income goes up. As far as property taxes in Utah, Stout said those costs vary from county to county.
In the meantime, the advantage goes to longtime homeowners. New owners like Hardy are getting into the market near the top.
“I’ve been around the country and real estate prices in Utah are on the higher end,” Stout noted.
If you’re an established homeowner, Dejan Eskic, senior research fellow at the University of Utah’s Kem C. Gardner Policy Institute, said you’re sitting in a good spot because of what happened during the pandemic. Eskic said there was rapid price acceleration, meaning homeowners gained equity. Combine that with record low interest rates and people refinanced.
But, Eskic clarified the majority of Utahns — “north of 75% of people,” he said — are priced out of Utah’s housing market.
“This picture looks great for existing homeowners. If you're trying to get into the housing market, it's the opposite.”
For new homeowners, Eskic understands that the monthly payments can be intimidating. He bought his home in 2021. But he said you’re planning on the long haul, even with market fluctuation, you’ll be building home equity.
“This is why people take the risk of jumping into homeownership and maybe paying a little bit more,” Eskic said. “We can debate whether that's good or bad. But it is one of the assured ways the middle class builds its wealth in America and has been for the past 50, 60 years.”
