Utah Housing Market Forecast, What To Look For In 2022
The housing market in 2021 made the “American dream” feel more and more out of reach for a lot of people. Renters have seen a steady, heady increase in rents over the past year, making their window for buying even more narrow.
In the past year, low rates and increased flexibility on location due to remote working conditions put the first-time home buyers on the path to the possible. However, limited inventory, insane bidding wars, unstable lumber prices, and the continuing pandemic have made buying a house challenging in 2021.
So, what does 2022 hold in store for those looking to buy or even build a new home? That’s a good question. With the economy slowly building back and the supply chain blockage seeming to be entering a more accessible phase, things might change in the coming year. Let’s see what’s on the horizon, shall we?
The Current Market
When looking at the current housing market, you see that Utah is among the top states in the West and nationwide experiencing record-breaking housing price increases. Prices in Utah have blown up so much that over half of Utah residents cannot afford the state’s median prices homes. For those of you keeping score, the median price for a single-family home in Utah for 2021 was $460,000.
The pandemic has disrupted the supply chain, throwing the national housing market into a frenzy. Utah ranks high in the housing market, second only to Idaho. In the second quarter of 2021, Utah’s housing prices increased a whopping 28.3% from 2020. This puts Utah at number two in the nation for a year-over-year percent increase.
Utah also has some of the most desirable areas to live in the nation, with people fleeing crowded cities and realizing that they can work from anywhere so where they can live has opened up. In Summit County, home to ski resorts and Park City, the median sales price skyrocketed by almost $350,000 to $1.15 million. That’s just insane.
Why the Affordability Pains?
Well, the simple answer is, of course, COVID. The pandemic has created unprecedented conditions that have disrupted the labor market and supply chains. 30% of construction
materials are imported from China, and the supply chain has been bunged up for most of 2021; demand is high, supply is low. High demand and low supply leave the market seeing house pricing rising to record-breaking levels.
The pandemic and supply chain disruptions have only exacerbated a problem that Utah has been facing for years, even before we were slapped with a pandemic, which is a housing shortage. The cumulative deficit in the market from 2010 to 2020 is 44,500 units. This shortage is leading to record-low rental vacancy rates, the smallest supply of unsold vacant homes, and the smallest supply of vacant for-sale existing homes.
Oh no, Another Bubble?
Anyone watching the housing market is asking the same question, are we in a housing bubble? That sends chills through the spines of anyone who keeps an eye on history. The last bubble burst in December of 2008, which brought about the credit crisis, which in turn caused the Great Recession in the United States.
It seems, to the uninitiated, that we’re heading down that same path. But, are we? Did we learn anything from the recession that could possibly save us from revisiting those nightmare times again? I mean, can’t we have great movies like “The big short,” “Too Big to Fail,” “Inside Job,” and “The Queen of Versailles” without going through the pain and suffering that was the inspiration for those films? I hope so.
It seems that financial experts are assuaging our bubble fears this time around, saying that because of the last crisis, we’ve gotten more intelligent and more aware. Housing experts are equally bullish this time around and believe the housing market will hold because of solid fundamentals. What the heck are those?
Solid fundamentals refer to policies put in place after the last financial crisis due to the housing market. Housing experts are sighting creditworthy borrowers and stricter mortgage qualifications, along with a basic supply and demand imbalance that make this a seller’s market. They say this is a substantial market, which could last another ten years.
Not everyone is on board with the positive views of the housing market. In 2005, Ivy Zelman, an analyst, prophesied the 2008 housing crisis. Zelman is once again ringing the danger knell.
What’s Zelman’s concern? Age and falling fertility rates. That’s right, Zelman sees the lower fertility rates, the aging population, and the rise of multigenerational households as a sign that there won’t be enough people left to buy up all the houses that are being built now to satiate the insane demand.
Ms. Zelman thinks that the overestimation of house demand added to the uptick in investor activity is a harbinger of disaster. Nonprimary buyers are flooding the market, and inflation is booming. These factors create an artificial, short-lived appreciation if people stop buying.
Suppose we are indeed headed for a downturn in the housing market. In that case, homeowners, who are currently sitting pretty, reaping enormous gains in equity, will be faced with losing all the appreciation they’ve captured up to this point. There could be a lot of people with a lot to lose.
Most housing experts agree that the double-digit home price appreciation the market has experienced over the past year simply won’t continue. There will be a slowing of appreciation. They also posit that mortgage rates will rise in the coming months stalling both investors and primary buyers.
Will 2022 Be Better?
The answer to that question is … it depends. Are you a buyer or a seller? Are you a first-time buyer, a primary buyer, or are you buying houses to flip? Are you a renter? All of these are factors in deciding what 2022 will look like as far as housing is concerned.
In general, experts predict that Americans will have an easier time finding a home in 2022, they will still face a highly competitive seller’s market. The for-sale home supply is expected to see some recovery in 2022, which is good news, especially for first-time buyers. Listing prices, rents, and mortgages are all predicted to climb; however, income is expected to rise as well, so it may even out.
These factors, workplace flexibility, more sellers, an easing of troubles in the supply chain all point to 2022 being a better, more accessible housing market in the coming year. The fact that banks learned a lesson, some of them at least, means the market is more stable, and we don’t have to worry too much about a bubble breaking and another financial crisis plunging the nation into darkness.
Talk to Revere Homes
If you’ve been planning to buy a home or build a home in the coming year, don’t despair; just talk to the housing experts at Revere Homes. They have the experience to help you navigate this confusing housing market. If your dream is a new home in 2022, the clever folks at Revere Homes are available to help you achieve that dream.
No matter what anyone says, the housing market is a volatile entity. When to get or when to get out is a matter of timing. If you’re unsure, talk to people who know. With decades of experience building homes and fulfilling dreams in Utah, Revere Homes are the people to ask when you’re planning on a new home.