Is the Utah real estate bubble going to burst?
Utah home values are skyrocketing. The median home sale price broke $400K for the first time this year, and in May it hit $437K. Home values are up 30 percent in the last year alone, an increase of $102K on average. We haven’t seen sustained rapid growth in home values like this since the early 2000s.
Wounds from the 2008 crash are still fresh for many. Waves of foreclosures and job losses hit the American middle class hard. Most of Utah was spared the hits that Florida and other states took, but it affected people everywhere. It makes perfect sense that people see the current state of the housing market and ask, when is everything going to come crashing down? This can’t go on forever…can it?
I don’t have a crystal ball, so I can’t tell you for certainty what will happen in the next year. No one can. (If anyone tells you they can predict the future, tell them they should be at the racetrack in Vegas.) What I can tell you is what my fellow Homies and I have seen, and what we think will probably happen.
The housing market doesn’t show any signs of slowing down. Prices have risen sharply and steadily for more than two years. Every indicator points to home prices continuing their rise. Rising inflation rates will likely increase home prices even further. Housing supply is reaching all-time lows, and demand remains high. The forbearance and foreclosure protections extended by the federal government have artificially restricted housing supply. These protections are scheduled to lapse at the end of June.
But people said the same things before the last crash, right? Here’s the difference: financially, we’re in a very different place. The root cause of the 2008 crash was bad lending practices, such as offering predatory subprime mortgage products. Since then, the federal government has put stricter lending regulations in place, and lenders are doing more due diligence to make sure they lend to qualified buyers.
When forbearance and foreclosure protections end, it’s possible that we’ll see another flood of foreclosures on the market like we did in 2008. However, with the number of qualified homebuyers on the market, it’s likely that any foreclosed homes will sell quickly.
There are several macro indications that we will continue to have a strong real estate market in Utah. For example, the state’s job growth is above average and unemployment is below average. Those figures suggest a favorable position for the state’s economy. Housing demand remains high as well. According to one study, fewer people are leaving Utah. Because fewer people are leaving, there are more people looking for homes than there are homes on the market. That leads me to believe that the housing market will stay competitive for a while.
The 2008 housing market crash is a huge part of why my cofounder, Mike “Hustle” Peregrina, was inspired to start Homie. The mass foreclosures made it clear: traditional real estate is broken. So Hustle approached me with his idea, and we got to work to see if we could do things differently and help fix it. We’re still working hard to make sure the dream of homeownership is easy, affordable, and accessible for all.
Is this real estate bubble going to burst? Probably not. It’s not even a bubble. What we’re seeing is a rising tide. If prices continue to rise, Utah homeowners will see more equity on their real estate investments. The more people we can get into homes, the more people can start gaining equity. If we play our cards right, the rising tide will lift all boats, in Utah and beyond.