Tag - real estate

Housing Becoming Less Affordable Along Wasatch Front

 

In March, researchers at the Kem C. Gardner Policy Institute found that our current market conditions are threatening to cause a crisis in Utah based on a growing housing shortage, while current home prices continue to appreciate.

The Wasatch front housing market is stronger than ever with an increasing demand for both single family and multifamily rental units through the northern part of the state. New research shows that demand has outpaced wage growth which is causing a greater rift in affordability. Studies show that median home prices during the first three months of 2018 were not affordable for average wage earners in about 68% of the counties included in the US report.

Incomes in Utah have failed to keep pace with interest rates, the report noted. The report also defined housing affordability as a unit where an owner or tenant pays no more than 30 percent of their household income toward housing costs — rent or mortgage.

Davis, Utah and Weber counties, which are located along the Wasatch front rated less affordable than any prior quarter average during the first three months of 2018, while Salt Lake county was equal to its historic affordability index.

Affordability often suffers during booming economic cycles, which frequently outpaces incomes for at least the start of these growth spurts. The risk is that individuals and companies could pull out of the area when they are no longer able to operate or live because of the expensive housing.

Home values are going up quickly [but] the negative side of that is that the homes themselves are also becoming less affordable. Three factors that could help improve affordability in the short term are things like decreasing home prices, increasing wages and although cited as the least likely to happen, decreasing interest rates.

However, the Wasatch front is still a more reasonable market than other large surrounding urban areas like Northern or Southern California, Las Vegas, Seattle or even Denver. Housing prices in Utah will continue to increase at rates well above the national average due to relatively high rates of population and economic growth. As long as the state is considered a bargain for some other competitive markets, we will probably see home prices continuing to grow and affordability continuing to be an issue.

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“The Struggle is Real…” Estate

For homes priced under $400,000, almost every property put up is going into a multiple offer situation. Home buyers are getting frustrated and feel like ripping out their hair when they finally find their perfect house, only to have some “punk” outbid them by $400.

The reason being is the lack of listings to satisfy the high property demand. Too many buyers want to take advantage of today’s low rates before they inevitably change. Buyers are snatching up homes faster than agents can list them on MLS. There are also not enough owners wanting to sell, perhaps waiting for values to continue appreciating. Many people are simply staying put, remodeling what they already have, perhaps due to lower rates from years ago. Others are converting their current homes into rental properties. In addition, builders are not able to keep up with the high demand to build new homes, as dwindling options give rise to a need for greater diversity.

Millennials are finally coming of age, buying homes unprecedentedly. Good paying jobs in Utah’s booming tech industry afford them the opportunity to be able to move into a starter home with a greater success rate than previously experienced.

According to the Salt Lake Tribune, Utah has the nation’s third highest growth rate in the country. They cite the reasoning being a continuation of high birth-rate and big-family culture, which many millennials in Utah are compelled to maintain. In fact, Utah has been in the top 10 for its growth rate every year so far this decade. As the number of new families continues to grow, the demand for property will sustain, putting increasing pressure on an already pressurized market.

The top 7 things you can do to get YOUR offer accepted:

  • Strong Pre-Approval Letter
  • Escalation Clause
  • Tighter Deadlines
  • Higher Earnest Money
  • Letter to seller from buyer
  • No Closing Costs
  • Shorten or drop due diligence

Having your documents in order for the lender, along with a specific, strong pre-approval letter goes a long way in getting an offer accepted. It lets the seller know that you are not flighty and are qualified to purchase the house in the first place.

Escalation clauses tell a seller that you will pay x amount (i.e. $2,000) over any other offer in order to ensure that the offer closes on your bid over another’s.

Many of our buyers are writing letters directly to the seller, saying how much they love the home and the neighborhood to help persuade the seller to choose their offer. The biggest help we have seen is not needing the seller to pay closing costs. One challenge with multiple offers is the property gets bid higher than what is actually worth. If the seller has to lower the purchase price to meet the appraised value, not needing the seller to pay closing costs is a huge help to seller to net the highest amount. Don’t lose your hair (or potential home) over the struggle of the current market! Our firm grasp on the buying process will give you peace of mind without losing pieces of your hair. But, let’s be honest; we all know you wear extensions anyway… 😉

 

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