As home prices soar in Utah, you’ll need almost 3 times minimum wage to afford rent
Buyers and renters are getting squeezed out as prices increase — could ‘price exhaustion’ correct Utah’s market?
Utah’s housing and rental markets continue to be relentless.
June marked another staggering month for home price increases, showing a 30% year-over-year rise to the median price of homes sold across the state. That’s an increase of $105,000 from $345,000 in June 2020 to now a median home sale price of $450,000, a new record.
That’s according to the Utah Association of Realtor’s June monthly market report, marking the 111th consecutive month of year-over-year median sales growth.
In Salt Lake County, Utah’s most populous county, that figure is even more striking. In June, the county’s median single-family home price climbed to well over half a million dollars: $551,000, according to the Salt Lake Board of Realtors. That’s up 31% from $420,000 in June of 2020.
Also on Wednesday, the advocacy groups Utah Housing Coalition and the National Low Income Housing Coalition released the national, yearly Out of Reach report, which showed in order for afford a two-bedroom apartment at fair market rent in Utah without being cost burdened, full-time workers need to earn at least $20.21 per hour. That equals $3,503 monthly or $42,036 annually.
In Utah, the Fair Market Rent (FMR) for a two-bedroom apartment is $1,051. In order to afford this level of rent and utilities — without paying more than 30% of income on housing — a household must earn $3,503 monthly or— Utah Housing Coalition (@Utah_Housing) July 14, 2021
$42,036 annually. @NLIHC #utpol https://t.co/8FFfxVWkQH pic.twitter.com/yiFBrcHqCN
In Utah, the fair market rent for a two-bedroom apartment is $1,051, according to the Out of Reach report. That figure gets higher in more expensive areas, to $1,204 in the Salt Lake County area and $1,321 in the Summit County area, home to Park City. In the Salt Lake City area, workers would need to earn a minimum of $23.15 an hour to afford a market-rate, two-bedroom unit and avoid paying more than 30% of their income on housing, or $25.40 in Summit County.
That’s even though the average renter in Utah earns only $15.66 an hour, according to the report. Minimum wage in Utah still sits at $7.25 an hour.
The new reports show the issues facing Utah homebuyers and renters the Deseret News has detailed in-depth in recent reports aren’t going away, and are becoming more acute.
Rental prices outpacing wages
As home prices continue to skyrocket, more and more Utah renters are getting priced out of becoming potential homebuyers and getting stuck renting. But they’ve also been facing steadily rising prices.
“Even though employers are competing for employees paying higher wages, this is still not enough for households to afford their housing only paying 30% of their income to housing,” the Utah Housing Coalition said.
The pandemic also made matters worse for millions of American renters, and as the end to a federal eviction moratorium looms, housing advocates worry for their futures.
“Prior to the pandemic, more than 7.6 million extremely low-income renters were already spending more than half of their limited incomes on housing costs, sacrificing other necessities to do so,” the Utah Housing Coalition news release issued Wednesday stated. “After a year of job losses, furloughs, and limited hours, many of these households will be even worse off.”
In the U.S., the average renter needs to earn $24.90 per hour to afford a two-bedroom place without spending more than 30% of their income on housing costs, or $20.40 per hour to afford a one-bedroom home, according to the Out of Reach report.
Some of Utah’s neighboring states are seeing even higher costs of living, according to the report. In Colorado, renters need to earn $27.50 an hour to afford the fair market rent for a two-bedroom apartment of $1,430 a month. In Arizona, renters need to earn $22.30 an hour to afford the fair market rent for a two-bedroom apartment of $1,160 a month. In Nevada, renters need to earn $21.83 an hour to afford a $1,135 a month two-bedroom apartment.
Two of Utah’s neighbors are seeing more affordable prices, however. In Idaho, renters need to earn $17.36 an hour to afford a $903-a-month, two-bedroom apartment. In Wyoming, renters need to earn $16.85 an hour to afford $876 a month for a two-bedroom apartment.
Utah’s latest housing market indicators
Consider these data points from the Utah Association of Realtors:
- Home sellers are raking in an average of 103.5% of original list price as eager buyers hope to outbid their competition.
- June’s inventory was down 53% compared to last June. At the end of last month, there were only 5,369 homes for sale, a record low for this time of year according to data going back to 2003.
- At the end of June, the state had 1.1 months of supply. That’s dramatically below the six months of supply needed for the market to be balanced between buyers and sellers.
- The statewide average of days homes sit for sale on the market tied the record low of 18 days. But that number is even lower when you zero in on high-demand areas. Wasatch Front homes were on the market a median of five days in the first quarter of 2021.
- At the end of June, a family making median household income only had 85% of the income needed to qualify for median-priced home at current interest rates.
Utah’s housing prices have been going up steadily for years, but an initial dip amid the COVID-19 pandemic was quickly followed by a surge. Utah has found itself on the national map for in-migration as Americans left big, expensive cities like San Francisco, New York, Seattle and Boston.
Combined with Utah’s top-of-the-nation population growth and strong economy, it becomes the recipe for the state’s housing boom.
“We’ve been in a rapidly increasing market statewide, both urban and rural, since last June,” said Adam Kirkham, a Salt Lake area-based real estate agent and a member of the Utah Association of Realtors’ executive committee.
Kirkham noted the housing market dipped slightly in June 2020 due to the COVID-19 pandemic, but since then it’s bounced back with a vengeance. Seeing 5% to 7% quarterly increases over the last year, Kirkham said the 30% figure doesn’t surprise him.
The soaring prices continue to be driven by supply and demand forces, which are accelerating as inventory slims.
“The reason for the skyrocketing home prices is not having enough homes for sale,” Caro Norton, president of the Utah Association of Realtors, said in a news release. “The number of active listings remains significantly below what is needed to keep up with buyer demand and protect housing affordability.”
While the Salt Lake housing market is booming with total sales climbing to nearly $1 billion in June, up 19% from a year ago, according to the Salt Lake Board of Realtors, single-family home sales were down nearly 14% for June.
That decline is due to fewer listing and rising prices, said Matt Ulrich, president of the Salt Lake Board of Realtors, on Thursday.
“Utah accumulated an underbuilding gap of 45,000 units over the past decade,” Ulrich said. “A severe lack of new construction has led to an acute shortage of available housing, and an ever-worsening affordability crisis.”
However, Ulrich also pointed out nearly 32,000 Utah permits were issued in 2020 for building of new residential homes — a record. But even if Utah continues to build 30,000 units per year, “it will still take us 10 years to erase the housing gap,” Ulrich said.
There’s still no end in sight for Utah’s home price increases, with housing experts saying today’s market is nothing like the “bubble” that led to the 2007 market crash and the Great Recession. They say Utah — and the entire nation — is seeing real demand that continues to outpace supply, and that will persist so long as the demand exists.
But what’s the breaking point? How long can Utah continue on this trajectory?
That’s a question with no firm answer. Kirkham said he doesn’t foresee anything that would stop Utah’s home prices from increasing, but they could slow if the market begins to see a “price exhaustion” as more and more potential buyers get priced out.
“I don’t see any signs of it slowing dramatically. But I do think we’re going to see some potential price exhaustion because the median household value is outpacing the median household income so dramatically,” he said.
“Every time you have a price increase, you end up eliminating that buyer that can afford a property, so eventually you’re going to get to a point where the competition may even out or lessen.”