Even with prices dipping, Utah’s housing markets remain unaffordable for most residents

Hangovers from Utah’s unaffordable housing crisis will probably be felt well past these recent stressful swings in mortgage rates, home prices and rents.

New numbers show home sales on the Wasatch Front plunging to a nine-year low and prices also dropping in many areas of the state, triggered by rate hikes that top economists say have abruptly snuffed out a 10-year run of booming real estate markets as of late least year.

Yet even with prices inching down, an official report card on the Beehive State’s residential markets and outlook for would-be homebuyers and the third or more of Utahns who rent also brings more harsh news: houses, apartments, condominiums and town homes have never been less affordable in a 50-year history.

Home prices, while dipping, are still out of reach for most Utahns, especially those trying to make their first purchase. And with relentless and record rent increases across the state far outstripping average income gains, many renters are finding homeownership ever more unlikely.

Here are other key takeaways from the latest signals that Utah’s longstanding housing affordability problems probably won’t improve anytime soon:

Price declines aren’t helping much

Home sales fell by almost 20% statewide in 2022 and the declines have been steeper, especially along the Wasatch Front, between January and June 2023. Initial data for August is not looking much better.

With the slowdown, Salt Lake County’s median price on a single-family home dipped to $582,500 as of the end of June, off 7% from a year before — when, according to the Salt Lake Board of Realtors, it stood at $623,138.

With price drops, ZIP code data compiled by the board indicates the region’s most affordable neighborhoods are in Salt Lake County’s Glendale (84104) at a median of $381,000, and in Kearns (84118) and West Valley City (84119) both at $420,000; along with South Ogden (84403) and Roy, both in Weber County, at $400,000 and $410,000, respectively.

Compared roughly to this time last year, Tooele County’s single-family home prices are down overall by at least 9%. Utah County has seen a 7% drop, Weber County is 6% lower and Davis County is also down by 5%.

But remember: This is after homeowners across the region have watched their equity swell by billions in total in recent years as prices have climbed at far faster than the national average — and especially after demand blew up in the initial pandemic years and prices spiked.

In panicked March of 2020 — the U.S. onset of the pandemic — the median ask on a single-family home in Utah’s most populous county stood at $410,000. As of last July, it was $610,000 — a 49% gain.

So these price corrections thus far has been relatively small, market observers say, at least compared to their decade-long climb. And the magnitude of effects of mortgage rates edging up from 4.5% to just short of 7% in less than a year, meanwhile, all but erases any advantages from the recent price declines.

According to calculations by the Kem C. Gardner Policy Institute in Salt Lake City, to buy a home at Utah’s median sales prices in the spring of 2021, you needed to earn at least $98,640 a year.

By the same time this year, that required income had risen to $150,000, up by about 50%.

Who is this hurting most?

Not surprisingly, recent surveys indicate that growing numbers of renters now believe they’ll never be able to purchase a home. Even at their falling prices, nine in 10 of Utah’s renters can’t afford the state’s median home price.

“That,” said Kristin Matthews, a Salt Lake City-based housing analyst and vice president with John Burns Real Estate Consulting, “is actually quite sad.”

And in a telling way, the drop in home sales also represents the shift in who can afford to buy a home in Utah these days and who is getting shut out.

“We’ve cut out a lot of the first-time buyers,” said Dave Anderton, spokesperson for the Salt Lake Board of Realtors. “But even move-up buyers are getting frozen out of this market. We’re in a dilemma right now.”

Younger adults and families starting out in life are some of the hardest hit. Already struggling with lower-than-average wages, higher debt levels and a sheer lack of homes priced within their income ranges, these age cohorts have now seen their buying power further sapped as mortgage rates rise.

A fresh survey released by the National Association of Realtors shows first-time buyers being squeezed out and are also more likely to come from under-represented segments of the population, with Asian, Latino and Black prospective homebuyers far more daunted by home prices than their White counterparts.

These and other homebuyers, according to Jessica Lautz, NAR’s deputy chief economist and vice president of research, “face the most difficult affordability conditions in nearly 40 years due to limited inventory and rising mortgage interest rates.”

Longterm outlook: Gap will widen

In many way, Utah’s housing markets are mirroring similar patterns unfolding nationally as the country’s many reactions to the COVID-19 pandemic and inflationary fears continue to ripple.

At the same time, the main way of alleviating the housing supply pinch — more homebuilding — has slowed more dramatically in Utah than elsewhere, as seen in a big drop in residential building permits since January. The contraction has pulled construction down by 37% from April to December of last year and analysts predict that’ll drop another 35% this year.

Some 45 other states across the U.S. have also seen declines in residential permits but Utah’s has been one of the deepest, with only Montana, New York, Wyoming and Alaska seeing larger drops.

Utah went into the pandemic, of course, with a longstanding gap between the number of housing units it was adding each year to its inventory and the rise annually in its number of households, related to population growth. The worry now is that the state’s ongoing shortage, after declining steadily from a peak of 56,230 housing units in 2017 to 28,415 last year, will now start rising again.

A similar picture is shaping up with apartment construction, which had seen a boom in recent years, particularly in Salt Lake City.

That sector, analysts and brokers said, is seeing a similar slowing as higher interest rates squeeze lending to developers, bringing a pause — at least — to construction that has brought thousands of new rentals to the Wasatch Front.

That’s likely, in turn, to mean low vacancy rates and upward pressure on rents will continue.