2022 Housing Forecast
A big part of my job is staying on top of research being done by housing experts and economists both locally and nationally. I know more about housing market forces than most people, but I won't pretend to be an PHD level expert on the economy and all the forces that go into shaping what our economy and in turn, the housing market are doing, which is why I rely on information from THE experts. And every year at the end of January, the local board of realtors gathers the best analysts from around the country to talk to us about what the data says.
Here are the highlights of what they had to say this year:
- In 2021 we saw a 27% increase in home values in Utah, which shattered the old record of 20.1% set in 1978
Now, I know that a lot of you will take this to mean that we're in a bubble, and the market is sure to crash any day now, but by all accounts by the experts that's not what we're looking at, especially here in Utah. The 2007 housing crash bubble was driven by shady lending practices, and artificial inflation of prices, as well as a myriad of other reasons...and if you look at what's happening now, that's not at all what's happening. This is very much a supply and demand issue, especially here in Utah, where we are waist deep in a housing shortage. When you have more buyers than there are homes to purchase, prices will increase.
Many people have been adamantly telling me that a crash is right around the corner. They are SURE of it, despite experts analyzing many streams of data and telling us otherwise. No one has a 100% guarantee crystal ball, but based on everything we know, we are not currently experiencing a bubble.
Fast forward 6 years from when these people started telling me this, and most of those same people can no longer afford to buy a home, but had they acted 6 years ago they would have a boatload of equity right now. My advice - if you want to own real estate in Utah within your lifetime, buy whatever you can as soon as you can, so that you can benefit from the massive gains in appreciation we're seeing, and it will be so much easier to upgrade to a better home down the road with the equity you'll build.
The median home value along the Wasatch Front at the beginning of 2015 was $220k, and now it's right around $500k.
- We're expecting an additional 10-12% increase in 2022, along with 4 scheduled interest rate hikes
If you're planning on purchasing a home this year, it's better to do so sooner rather than later. Obviously higher prices make home ownership more expensive, but what most people don't realize is that interest rates have a HUGE impact on that, too. Just using a basic mortgage calculator - if you purchase a $500,000 home with a 5% down payment, the different between an interest rate of 3% and 3.5% is about $130 a month. And for a lot of buyers that's enough to make it no longer affordable. Not to mention that house that currently costs $500k will cost upwards of $550k by the end of the year.
So if you redo that math comparing a $500k home at 3% to a $550k one at 3.5% the difference is actually around $400 a month! OUCH! Moral of the story - shop as early as you can to avoid getting hit by both rising prices and interest rates. Realistically this is the cheapest housing will ever be along the Wasatch Front because we are running out of land to build on.
There are estimates on where rates will be by the end of the year from many sources, but the general consensus is that by end of 2022 we'll be looking at 3.5-4% rates instead of the low 3% range we've been at lately.
- Even with these gains and the growing difficulty of breaking into the housing market, "Utah is the only state since 1900 where the homeownership rate has never fallen below 60%."
Utah's residents tend to be very financially responsible, and home ownership is a high priority. This fact, along with our very stable labor force, and self contained economy makes us one of the most resilient states against economic downturn. So even if the rest of the country were to see a dip, it wouldn't impact us to the same extent, which we saw during the housing crisis as Utah experienced one of the lowest decreases in home values and one of the fastest recovery periods.
- There are a few prime options of freeing up land in the future so that we can make the most of it
By 2060 we're expected to have an additional 1.7 Million people living along the Wasatch Front, and with that increase in population comes a demand for more housing, which means we have two options - build UP or find more land. There are already a number of projects taking place to squeeze in more housing as single family homes are torn down to be replaced by condo complexes and townhomes, and people are finding small areas of land that aren't currently being efficiently used.
But on a larger scale, some plans that can make a huge impact include moving the prison, and redeveloping the area in Draper into what's being dubbed "The Point," a mix of residential and commercial properties that is currently underway. Click here for more info on that plan. The photo below is a mock-up of what that area will look like when it's finished.
Other ideas for potential future development, but that are not currently in the works, include:
A. Petrochemical Alley- The corridor in North Salt Lake City where the oil refineries are. There are 10,000 acres that could be developed but would require extensive environmental clean-up. One day the land will be more valuable for houses and developments similar to The Point.
B. Camp Williams-there are another 10,000 acres that might be better redeveloped as housing.
C. Oquirrh Slopes-has over 46,000 acres not including the steep portions. Much of this would also require environmental remediation from copper mining activities.
D. Hill Air Force Base- there has been talk over the years about whether this base will stay open or not, and if it doesn't, it frees up a TON of land that could be used not only for homes but for commercial properties to create/replace jobs in the area.
E. Lots of land West of Eagle Mountain - there's a big area of land between The Ranches and City Center that will continue to be developed. Right now it's one of the most affordable areas to buy a newer home, and more companies like Facebook are moving jobs out that way.
F. South Valley Regional Airport- 35,000 housing units could be built there. We do need a second airport for safety reasons according to experts, but the question is could it be moved elsewhere so we can use that land more efficiently?
- A futuristic, hopeful option: Self driving cars will help eliminate the need for parking lots
The first time I heard this train of thought a few years ago it seemed a little far out there, but more and more this is looking like a reality. Not only are we focusing on making more easily accessible public transit systems, but the prospect of self driving cars is making planners consider the idea that we won't need as many parking lots. Imagine that instead of owning a car you can just order a ride from a self driving car to assist you in your commute, and then that car goes on to give other people rides instead of just sitting in your workplace parking lot. Believe it or not, it's one of many things being considered in planning for the future development of land, and in the not so distance future you may see a lot of parking lots being turned into homes or commercial buildings. There are over a million parking spaces that they anticipate we won't need in the future!
If you want more info about any of this, or have questions about what the market is doing, please feel free to reach out! I'm happy to send you more info or sit down to talk about your real estate goals.