The COVID-19 pandemic years created unmatched volatility in Utah’s housing market. The Kem C. Gardner Policy Institute’s State of the State’s Housing Market report provides a detailed analysis of current market conditions in Utah, which shows residential construction activity, existing home sales, housing shortages, and affordability were all impacted in a way not seen since the Great Recession.
“In over 50 years of Utah’s housing history, there are no back-to-back years like 2021 and 2022,” said Jim Wood, Ivory-Boyer Senior Fellow, and lead author of the report. “Building permits for residential units increased by 26% in 2021, only to fall by 26% in 2022. These COVID-19 pandemic years now join the Great Recession as one of the most extraordinary moments for Utah’s housing market.”
Key findings from the report include the following:
Utah’s ten-year home building and real estate boom ended abruptly in 2022 – First quarter home building activity and real estate sales in 2022 seemed to indicate another exceptional year for Utah’s housing market. But over the following nine months the mortgage rate increased from 4.0% to 6.5%, undercutting homebuyer demand.
The Federal Reserve’s monetary policy affected all types of residential construction – Year-over comparisons show single-family residential construction was hardest hit with a 32% drop in building permits in 2022, a 27% decline in apartment unit permits, and a 9.5% decline in condominium, town home, and twin home permits.
The housing market contraction continued through Q2 2023 – Through June 2023, the year-over number of residential units receiving building permits in Utah fell 37%, existing homes sales fell 20%, and the median sales price of a home fell by 7.5%.
Utah’s housing shortage is likely to increase by 2024 – Utah’s housing shortage decreased from 56,800 units in 2017 to 28,400 units in 2022; however, as homebuilding activity contracts, new households will outnumber new housing units. Consequently, Utah’s housing shortage will likely increase to over 37,000 units by 2024.
Despite the dip in housing prices, housing affordability continues to prevent homeownership opportunities for many households – In Q2 2023, the median income household in the Salt Lake City Metropolitan Area could afford only 21% of the homes sold in that area. In an affordable housing market, the median income household should be able to afford 50% of homes sold.