2018 Housing Forecast
"Last Year Was the Fourth Best Year in Overall Home Sales and Biggest Year Ever for Multifamily Sales." - James Wood
The most common question I get when people find out I'm in real estate is, "How's the market?" And if you've asked this question in the past couple years of any real estate agent in Utah you've probably heard from all of them that it's been a strong seller's market and that it's been crazy hot. News flash for 2018: that's going to continue.
But what does that mean? I'm a numbers person, so I like to see the data. Here's a recap of the last year from James Wood, a reputable economist from the University of Utah:
The reason we've seen a slight decline in the number of homes sold is due to extremely high demand. This demand is coming from a high net in migration from other states, as Utah is #1 in this area due to our strong economic growth and an in-flux of jobs here. As interest rates start to tick up you'll also see some more increased demand as buyers try to purchase before interest raises significantly.
And because of the high demand, we've been seeing higher prices. I'm sure you've noticed as home sales in your neighborhood have been increasing dramatically year after year. We have officially surpassed where home values were prior to the housing market crash by about 15%, which outpaces the effects of inflation.
The median home price last year was $325,000 after a 10% increase over 2016, and it's expected to approach $350,000 by the end of 2018.
The next question I always get asked is, "Are we experiencing another housing bubble?" And the vast majority of economists believe that we are not. The last bubble was the very first time that Utah saw consecutive years of price decline (for 4 years), and directly preceding that bubble burst in 2004-2007 we saw a 30% increase in household debt. The ballooning of debt combined with extraordinarily relaxed lending practices put us in a very precarious situation. We are no where near the same conditions that led to the bubble, and while prices are high they are attributed to other more stable conditions.
The conditions leading to such high prices are the same conditions that are contributing to us experiencing a housing shortage. We have already talked about the high rate of in migration to Utah, and in addition to having more people needing housing, builders have been constructing new homes at a much lower rate than average over the past few years. This slowing of new construction is due to lack of labor, increased cost of supplies, zoning and regulations, and also due to the fact that we are quickly running out of land in Salt Lake County and surrounding areas. Builders are doing their best to catch up with demand, and you can expect to see more new construction homes available this year.
Forecast for 2018
- Median home value: $350,000
- Average price increase of 7-9%
- Expecting over 18,000 sales this year, but not expected to break all time record of 18,987
- Net in-migration of 6,900 individuals, and household growth of 8,500 are expected.
- Interest rates are expected to raise to 4.6-4.7% by most estimates
- Expect an increase in demand from buyers trying to purchase ahead of interest rates increasing
If you're wondering how the latest developments affect your home value or your prospects of buying real estate, please get in touch! I'm happy to answer any questions you have and to help you consider all your options.