Thursday, January 20, 2022 / by Rachel Green
That's a wrap on 2021! And speaking of rap, last year's housing market was like Machine Gun Kelly - moving a bit fast. As we head into 2022, our heads still spinning, let's take a deep breath and see what the economic fortune tellers of the real estate world have for us.
But first, lets see how accurate (or not) they were about last year. James Wood, Economist and Researcher at the Kem C. Gardner Policy Institute, forecasted an increase in home sales (6-8% for single family homes) and double digit increase in value for condos/ multi-family homes (at around 10%). Well, let's see how well his crystal ball is calibrated.
In 2020, the number of homes sold was 19,125, and in 2021, the number of homes sold was 17,375. So 2020 still holds the record for most number of homes sold in a year in Utah.
As for the appreciation, Wood was much less aggressive in his forecasting than the market was in its appreciation rate. In fact, to quote Wood himself in his latest housing report, “The 2021 Utah housing market will be long remembered for its record-breaking price increases. Statewide, housing prices increased by 27%, shattering the 43-year-old record of 20.1% set in 1978.”
So does this mean we finally entered that bubble everyone's talking about? The short answer - no. The long answer... read on.
As we discussed last year, the forces that affect our market - jobs, population growth, and interest rates - remain constant. Utah remains the nation's fastest growing state, but what is more surprising to us is the report released by the University of Utah's Kem C. Gardner Policy Institute. The institute says the state is on track to reach 4 million residents by 2033 and 5 million by 2051. And by 2060, the population is expected to reach about 5.5 million, which is a 66% increase in population. That same report projects a 1.3 million increase in jobs by 2060.
Still not convinced? Here is the answer to the question on everyone's mind since about 2014. Brought to you by the Ivory-Boyer Senior Fellow, Kem C. Gardner Policy Institute, David Eccles School of Business at the University of Utah, and the Salt Lake Board of Realtors®...
Does Utah Have a Housing Bubble?
"In the aftermath of the Great Recession, housing prices fell by 15.6%. This is the only instance in the past 75 years of housing history when price declines lasted more than a few consecutive quarters. There were two single-year declines during the 1950s, a single-year decline in the 1960s, and a few consecutive quarters in 1983 and 1987–1988. But the rare occurrence of falling prices over an extended period (2008–2011), the bursting of Utah’s only housing bubble, set the stage for a long period of price acceleration. Certainly, the first few years of the current acceleration were a recouping of falling prices during the Great Recession and its aftermath. Have the nine years of rising prices created the potential for a housing bubble? Utah’s housing past, at least back to World War II, confirms the market has experienced only one housing bubble, despite nation-leading price spikes in 1994 and 2006. Every period of price decline, whether brief or prolonged, from the 1950s to 2008–2011 has been associated with a weak or contracting labor market. From the historical data, it appears that a housing bubble, with its extended price decline, must be associated with a substantial loss in jobs. For Utah to experience a housing bubble in the near term it would require a loss of jobs, an unlikely prospect in the next few years. Furthermore, Utah’s only housing bubble occurred during the first U.S. financial crisis since the Great Depression. Financial crises are much rarer, more serious, and destructive than recessions. The 2008 financial crisis was precipitated, in large part, by loosened banking regulations, reckless lending practices (subprime loans), and risky financial innovations (mortgage-backed securities and collateralized debt obligations), all of which led to a dangerously leveraged global financial market. These conditions were not present in 2021."
So, what do the experts predict for this year's housing market? Wood forecasts an increase in home values in the low double digits (10% to 12%), with fewer homes being sold this year (predictions are near 17,000). Interest rates are anticipated to continue to increase ever so slightly, putting the average projected mortgage rate near 3.55%.
While 2022 looks like it's going to be another great year for homeowners, what does this all mean for future generations and non-homeowners? Well, as they say, to see the light, you must know the dark. The increase in wealth accumulation for homeowners is great, but for non-homeowners the increasing prices create greater inequality and diminished wealth. If you or someone you know doesn't own a home or is worried about the possibility of homeownership for their family, give us a call. The barriers to entry for owning a home are low and there are more ways than one to make it happen. Don't let the prices outpace your earnings or your savings. Now is a fantastic time to become a homeowner, make a move, or cash in on an investment you've been holding onto.
Don't hesitate... do like the rapper we mentioned at the beginning and act quickly!
Give us a call at 801-893-1088 or start your home search at SaltLakeHomes.com now!
Did you know? Utah is the only state since 1900 where the homeownership rate has never fallen below 60%.
Also, Utah is 2nd in the nation for housing price increases. From 1991 to 2021(Q3), the percentage increase in Utah home prices was 601.9%, 2nd in the nation to Austin, TX. That percentage increase in the last five years is 84.6%, 2nd only to Boise, ID.
What are you still doing here? No more fun facts. Be like Mr. Kelly and act fast! Call us at 801-893-1088 or start your home search at SaltLakeHomes.com now!