Not unlike most markets across the country, the Utah real estate market has felt the constraints of tight inventory for longer than it would care to admit. There aren’t enough homes to satiate the demand that has resulted from an economy that has come a long way in a relatively short period of time. Compounding the inventory shortage, the pandemic has disrupted new builds and made it even more difficult for people to find affordable housing. However, it should be noted that while the pandemic has driven up prices and competition in the Utah real estate market, demand remains unfazed. More people appear ready and willing to buy in the wake of increasing prices than ever before, and local real estate investors who position themselves well in 2021 could wind up the beneficiaries of an attractive marketplace.
The Top Utah Real Estate Markets
While the best real estate market in Utah is up for debate, here’s a list of the cities investors may want to pay special considerations to:
Unemployment Rate: 4.3% (latest estimate by the Bureau Of Labor Statistics)
Population: 3,161,105 (latest estimate by the U.S. Census Bureau)
Median Household Income: $65,325 (latest estimate by the U.S. Census Bureau)
Percentage Of Vacant Homes: 9.79%
Foreclosure Rate: 1 in every 23,258 (0.4%)
Utah Median Home Prices
The median home price in Utah is $386,723. To be clear, today's home values represent years of appreciation. Much like the rest of the country, real estate in Utah has experienced both ends of the price spectrum since the last recession. Values bottomed out around the first quarter of 2012 because of the Great Recession. Since then, prices across the entire state have proceeded to increase for more than eight years, to the tune of 100.3%; few markets have experienced appreciation rates on that level.
Appreciation across the Utah real estate market was directly correlated to the same factors driving national trends: a strengthening economy, improving confidence in the housing market, and a distinct lack of available inventory. The unique combination of these factors increased home values across the country while doing the same in Utah. On a national level, the country’s median home value increased about 40.0% from bottoming out in the Great Recession. To put things into perspective, the median home value in the United States is now $263,351.
While the Coronavirus threatened home values when it was first declared a pandemic, it would appear as if it was a minor speed bump for Utah. In fact, the Utah real estate market is firing on all cylinders, and home values are proof of the progress. Again, appreciation slowed at the beginning of the pandemic, but several factors have come together to increase home values to historic levels. Increasing confidence in the housing sector, historically low interest rates, hopes of broader vaccine distribution, and a lack of available inventory have all created an impressive catalyst for buyers.
Activity has returned, and nobody is happier than today's homeowners. The competition in the Utah real estate market has enabled owners to increase prices, and people appear eager to pay premiums. Consequently, it's safe to assume prices will continue to rise for the foreseeable future. Some experts expect home prices to increase by as much as 11.2% over the next 12 months in the Utah real estate market.
Utah Foreclosure Trends & Statistics
The Utah real estate market has a very low foreclosure rate compared to the national average. According to RealtyTrac, only one in every 23,258 homes in Utah is considered distressed (default, auction, or bank-owned). At that ratio, the state currently boasts a foreclosure rate of 0.4%, which is below the national average. One in every 13,482 homes in the United States is considered distressed, or a total of 0.7% of the housing inventory. That said, Utah’s foreclosure rate is roughly half that of the national market.
While the Utah housing market may have a lower-than-average foreclosure rate, there are still pockets of distressed inventory spread across the state. That’s not to say the following counties have high foreclosure rates themselves, only that they have high foreclosure rates compared to the rest of Utah:
Sevier: (1 in every 2,885)
Carbon: (1 in every 4,885)
Grand: (1 in every 5,224)
Tooele: (1 in every 5,246)
Kane: (1 in every 5,954)
Tax Lien Investing
Tax Lien or Deed: Tax Deed state
Redemption Period: None after sale
Utah Real Estate Investing
In eight years' time, the Utah real estate investing community has done well for itself. Following the Great Recession, appreciation rates have continued marching up without any barriers. Nonetheless, demand appears to be healthier than ever. Rehabbers have seen activity and profits increase year-over-year, and 2020 was no exception. It is worth noting, however, that profit margins have grown smaller in the last few years and are expected to grow thinner in 2021. Historic appreciation rates have made it more difficult to secure deals at a reasonable price. That's not to say investors can't flip homes in Utah, but rather that the Coronavirus appears to have made other exit strategies more attractive.
With appreciation continuing to march higher, more investors are embracing becoming landlords. Long-term "buy and holds" appear to be the optimal exit strategy for Utah real estate investors. Not only have home values increased to the point where they are too expensive, but the Coronavirus has created a new marketplace with three fundamental indicators that seem to favor landlords over rehabbers:
As recently as December 2020, the monthly average commitment rate on a 30-year fixed-rate mortgage was 2.68%. At that rate, it's never been cheaper to borrow institutional money, which simultaneously helps to offset today's high prices and increases monthly cash flow for investors who buy rental properties.
With a 20.20 price-to-rent ratio, it is more affordable to rent a home in Utah than to buy one. As a result, it's safe to assume more people will turn to landlords for living arrangements.
Home values in Utah have increased for eight years, which means profit margins on flips have dropped. Investors are still free to conduct rehabs, but long-term rentals are more viable under the market's current conditions.
Investors are lucky to have several viable exit strategies at their disposal, but none appear more attractive than building a proper rental property portfolio in the wake of the pandemic. Too many important market indicators are pointing towards becoming a buy-and-hold investor to ignore.
Utah Housing Market Predictions
The Utah housing market has had a great run, much like the rest of the country. For the better part of a decade, in fact, real estate in Utah has exhibited many of the same characteristics as its national counterpart. Price increases, confidence in the market, and several other indicators are in line with national trends, but what does that mean moving forward? What can the Utah real estate investing community expect moving forward?
St. George to receive more millennial attention: Only a short drive from Nevada and Arizona, St. George's location is perfectly suited for anyone looking to take advantage of Utah's picturesque desert landscapes or its outdoor activities. More millennials, in particular, may start calling St. George home because of its proximity to other states but also because of its affordable home prices. Approximately $30,000 less than the state average, the median home value in St. George should attract more buyers in a market that is starting to get a little too expensive.
Inventory will drive appreciation: Prices in the Utah real estate market have increased for eight consecutive years. While the driving force behind the latest bought of appreciation may be attributed to several factors, a distinct lack of inventory is perhaps the most prominent reason prices have risen so much. The Coronavirus has also prevented builders from adding to inventory, which only compounds the inventory shortage. As a result, expect prices to increase for the foreseeable future.
Suburban influx: 2021 may be just the beginning, but there's a good chance more people will move away from expensive cities with a reputation for Coronavirus breeding grounds. More people are already using "work-from-home" practices as an excuse to move to the less expensive suburbs of Utah, and the trend should build momentum this year.
The Utah real estate market has taken eight years of recovery and run with the momentum it has managed to build. Since the end of The Great Recession, in fact, local home values have doubled. That said, prices are starting to get a little restrictive. Today, real estate in Utah is expensive, but it hasn't scared away buyers. In fact, activity looks healthy, heading into 2021. Buyers, sellers, and investors may all be able to capitalize on the coming trends.
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