NWAOR: 2022 real estate forecast shows a still-hot market
After an ultra-hot housing market in 2021, Northern Wasatch homebuyers and sellers can expect another robust real estate year in 2022.
That’s according to Jim Wood, Ivory-Boyer senior fellow at the University of Utah’s Kem C. Gardner Policy Institute, who recently spoke to Northern Wasatch Realtors.
Wood, who has studied Utah’s housing market for decades, forecasts that real estate sales will remain steady in 2022 while home prices will rise 10%-12%. Meanwhile, new home construction will reach a new record high of 36,000 units but will remain constrained because of a continued labor shortage.
“Utah is in the midst of a really strong economic boom, and the fundamentals are still very good,” Wood told Northern Wasatch Realtors. “I think we’re going to have a great 2022 for your industry.”
Competitive housing market continues
In 2021, Weber and Davis counties had a robust year with more than 9,000 real estate sales. That number, however, would be even higher but for Utah’s housing shortage.
The current situation dates back to the Great Recession. In the decades prior to 2010, Utah built housing in excess of household growth. This trend reversed after the Great Recession when household growth continued, but housing construction plummeted.
“By 2014, we really begin to see a tightening of the housing market, and that’s really impacted housing opportunities as well as prices,” Wood said.
Although home-building started catching up in 2018, Utah is still short 44,000 housing units. This shortage is evidenced in the new, existing and rental markets.
For example, even though builders constructed a record number of homes in 2021, they are selling everything they can build.
“We’re at record levels, and we still can’t satisfy demand,” Wood said.
For existing sales, the time it takes to sell a home is at a record low of seven days.
“This just screams housing shortage,” Wood said.
On the rental side, vacancy rates are also at record lows. The vacancy rate is 1.9% in Davis County and 2.1% in Weber County.
“All the years that I’ve followed the market, I’ve never seen it as tight as it is now for rentals,” Wood said. “All of the signs for points of entry show a housing shortage.”
Shortage creates record home-price growth
The housing shortage will continue to put upward pressure on home prices. While Wood expects some moderation, there is no sign yet of a home-price slowdown in Davis and Weber counties.
Factors leading to the high home prices include economic and demographic growth, higher development and construction costs, and impacts from COVID-19.
“Low interest rates have really brought a lot of people into the market,” Wood said. “Who would have thought we’d have had historic increases in housing prices during a pandemic? To be sure that’s a paradox, and that’s exactly what happened.”
During the third quarter, Utah home prices increased 28.3%, according to the Federal Housing Finance Agency. Meanwhile, Ogden-Clearfield metro area home prices rose 24%, which was the 11th-highest increase of 183 metro areas in the U.S., according to the National Association of Realtors. The metro has the 26th-highest median sales price in the country.
“That means that the housing prices in the Ogden-Clearfield metro area are higher than about 86% of all metro areas,” Wood said. “That’s top-tier.”
Even with the record increases, Wood said he doesn’t believe there is a housing bubble. Unless there is a very serious recession, which is not anticipated, he said he doesn’t see a prolonged period of price declines.
He does expect, however, that the recent spikes will slow price appreciation for future generations. Rather than the historic average of 5% appreciation, he expects 3.5%-4% growth.
“We’ll see slower rates of growth in the late 2020s and beyond,” Wood said.
To learn more about home price trends in your city and neighborhood, contact a local Northern Wasatch Realtor. Find one who specializes in your area by searching the online directory at NWAOR.com.
Stephanie Taylor is the 2022 president of the Northern Wasatch Association of Realtors.