Imagine being a first-time homebuyer in today’s market: You’ve saved for years for a down payment, you have a stable full-time job, your spouse has a stable full-time job — yet you are unable to find a house with a payment that meets your budget.

This is the situation that numerous young Utahns are facing right now. In fact, many non-homeowning millennials face significant obstacles as they pursue homeownership today. A Utah Association of Realtors December 2022 survey of this group found:

• 95% said having enough money for a down payment and closing costs was an obstacle.
• 94% said interest rates were making the cost of a loan too expensive.
• 92% said affordability is a big problem.
• 91% said they are unable to find a home that fits their preferences and budget.

Utah millennials say the numbers aren’t adding up for them, according to focus groups conducted by the Utah Association of Realtors.

“As a millennial, it seems like it’s getting further and further out of reach for our generation to be able to afford, even with dual incomes, a home that we can call our own,” said one college graduate focus group participant.

Many focus group participants felt that older generations had a better opportunity for homeownership than they do now.

“They were able to do it on one income,” said one focus group participant. “Most people now have two. So why can’t we do it with two?”

Supply shortage

It’s clear why buyers are facing challenges: There aren’t enough entry-level starter homes for sale.

Of 932 active listings in Weber, Davis and Morgan counties, only 239 were detached, single-family homes priced at $500,000 or less, according to Feb. 21 data from UtahRealEstate.com. That number falls to 84 when searching for homes priced at $400,000 or less. Only 16 single-family homes were priced at $300,000 or less.

In other words, Utah has a severe shortage of starter homes — a shortage that’s hurting a generation of Utahns wanting to become homeowners.

For example, a Utah family earning the median income of nearly $80,000 can only afford a home priced around $325,000 at current interest rates.

However, the median price for a single-family home in Weber, Davis and Morgan counties is $455,000. Assuming a 5% down payment, that home price would require a monthly payment of around $3,200 at today’s interest rates — a payment that’s out of reach for most.

How we got here

More than a decade of underbuilding combined with significant population growth created Utah’s housing shortage — a situation that led to skyrocketing home prices and set the stage for today’s affordability challenges.

While builders have ramped up production the past couple of years, the statewide housing shortage still stands at about 31,000 units (and growing), according to a July 2022 report from the Salt Lake Board of Realtors.

Specifically in Weber, Davis and Morgan counties, 3,228 single-family homes were built on average each year from 1994 to 2007, according to the Ivory-Boyer Construction Database. During and after the Great Recession, that average fell to an average 1,699 units per year as builders cut production nearly in half.

Had construction kept its pre-recession pace, Northern Utah would have nearly 23,000 more single-family homes today.

At the same time builders slowed production, the area’s population spiked. Weber, Davis and Morgan counties saw growth of nearly 54,000 people from 2010 to 2022, according to data from the Utah Population Committee.

To make sure these new households have access to housing, Realtors are encouraging builders to construct owner-occupied starter homes/townhomes/condos and help restore market balance. They are also asking local cities and residents to support the creation of new owner-occupied homes/townhomes/condos that are priced in line with Utahns’ incomes.

Over the last five years, we have all seen huge growth in apartment construction and “McMansion” construction, but very little entry-level-priced, owner-occupied starter unit construction.

In Davis, Weber, Morgan counties, we are roughly 18,000 owner-occupied dwellings behind where we need to be to meet our current household supply-and-demand shortage from the last 15-year building deficit.

To make up for this historic deficit, we will all need to support the need for growth in the owner-occupied starter unit category. Let’s ensure the next generation still has an opportunity for homeownership in the town they grew up in.

To learn more about housing issues in your area, talk to a local Realtor. Find a directory of local Realtors at NWAOR.com.

Adam Speth is the 2023 president of the Northern Wasatch Association of Realtors.

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