Utah real estate sees big affordability gains
Utah real estate sees big
affordability gains
President’s Message
Chris Sloan
Utah homes are the most
affordable they’ve been since 2004, according to a new report from the
National Association of Home Builders and Wells Fargo. The Housing Opportunity
Index, which uses home prices, mortgage rates and median household incomes to measure
affordability, shows a clear trend that homes are becoming more affordable in
all of Utah’s major metropolitan areas.
That’s good news for Utah
home buyers who are spending less on their housing costs or are using the
savings to trade up to another house. The NAHB considers a home affordable if a
family making the area’s median income spends less than 28 percent of
their pay on housing costs.
In Salt Lake County, a family
making the median income of $67,800 could afford to buy 70.6 percent of the
homes sold in the second quarter, according to the report. That’s up from
last year’s second quarter when only 54.6 percent of homes sold were
considered affordable and up substantially from the record low affordability in
third quarter 2007, when only 30.8 percent of homes sold were affordable.
In the Provo-Orem metro area,
the affordability improvements were even more pronounced. In the second
quarter, 71.3 percent of the homes sold were considered affordable to families
making the median income of $62,900, up from only 48.5 percent last year and up
dramatically from the record low of 22.5 percent in third quarter 2007.
Ogden-Clearfield had the highest affordability in the
state at 81.5 percent (up from 68 percent last year), and St. George, at 57.2
percent, saw a substantial rise in affordability (up from 36.8 percent last
year).
The affordability gains are the result of a
combination of reduced home prices and lower mortgage rates. Although home
prices are still slightly higher than they were in 2004, today’s super-low
interest rates have put affordability back to 2004 levels. In Salt Lake, for
example, 70.6 percent of homes were considered affordable in the most recent
data, compared to 75.2 percent in 2004.
The numbers in the Provo-Orem area were even closer to
2004 levels. In the second quarter, 71.3 percent of the homes sold were
considered affordable, only a tad off from the 72.6 percent recorded in 2004.
Wells Fargo Chief Economist
Kelly Matthews conducted a separate analysis with findings similar to the NAHB
report. He said although average home prices are still higher today than in
2004, homes are about as affordable as they were five years ago because
mortgage rates are closer to 5 percent rather than the near 6 percent rates in
2004.
“It shows basically along
the Wasatch Front, as of year-end, our affordability is back to levels that
existed in 2004 [when the real estate market here was doing well],”
Matthews said. It was also a time when The Wall Street Journal highlighted Salt
Lake City as one of the most undervalued markets in the country.
Now that we’re back to
those 2004 levels, home buyers are taking notice of the newfound affordability.
In July, sales of existing Wasatch Front homes were up for the second
consecutive month, rising 4 percent, while nationally sales increased 5
percent. Furthermore, the newest data from the National Association of Realtors
shows that pending home sales are up for a record sixth consecutive month.
NAR Chief Economist Lawrence Yun said buyers are
taking advantage of the low home values before prices turn upward. The
first-time home buyer tax credit and record high affordability are also
providing momentum to the market. According to Yun, the typical mortgage
payment now takes less than 25 percent of a middle-income family’s
income, the lowest amount on records dating back to 1970.
“If
someone feels secure in their employment and income and needs a larger home, in
actuality it’s probably the best time to buy in a generation,”
Matthews said.
For more information about the housing market and to
find a home that’s affordable for you, contact your local Realtor.