For Utah housing costs, the highway to San Francisco is moving at full speed.
It’s the traffic going the other direction we ought to worry about.
If you doubt that the Wasatch Front is headed toward Bay Area real estate prices, consider this:
Zillow, the real estate marketing company, reports that the typical home in Park City now sells for $1,027,216. In San Francisco, it’s $1,419,714.
The difference is that Park City’s home values shot up by 11.2% over the past year, while San Francisco’s fell by 3.2%.
If COVID-19 illuminated anything, it was the dissatisfaction of Bay Area residents. As the pandemic began, many people were told to work from home indefinitely, so they decided to move somewhere that didn’t cost as much.
The East Bay Times reports that about 114,600 people left the Bay Area during the fourth quarter of 2020 alone.
In Utah, the situation is the opposite, for now. People, a lot of them, are coming here. But that won’t last long if no one can afford to stay, or if they keep getting outbid when trying to buy a house.
David Robison, president of the Utah Association of Realtors, told me this week he doesn’t think the Wasatch Front will reach Bay Area levels for at least 40 years, but he is worried. As Utah’s own children grow up, and as people come here from other states, the demand keeps growing. By some estimates, the state has a deficit of about 50,000 places to live.
The only solution, Robison said, is to build higher density housing — the very thing that gets suburban voters so riled up they throw people out of office.
“If done smartly, it can be a powerful way to overcome our inventory needs,” he said, pointing to the Daybreak development in South Jordan as an example. “But it’s hard when people only want one-third acre lots.”
Robison said cities often require that houses built on one-third acre lots contain a minimum number of square feet. That, in turn, means those subdivisions contain expensive homes, which, in turn, pushes prices higher. “That’s not going to solve our issue.”
As if to emphasize how hot the market is here, this week Bankrate.com crowned Utah the king of its national housing heat index.
“Utah boasts the nation’s strongest pace of job growth, along with rock-bottom unemployment, ultra-low mortgage rates, few mortgage delinquencies and low state and local taxes,” the publication said. “Residential real estate has boomed during the coronavirus recession, and Utah has emerged as a particularly desirable market.”
At the same time, Re/Max named the Salt Lake metro area as the place with the fastest selling homes, with an average of only 16 days on the market. That compares with 36 days a year ago.
All this is, of course, good news. It’s a sign the state is poised to rebound strongly from the pandemic. But unless all that growth can correspond with places to live, the state may find it has limits on prosperity, even as the cost of living skyrockets.
Park City is, of course, an outlier. In Salt Lake County, Zillow reports the typical home costs $447,003. In Utah County, it’s $419,714. But both represent increases of more than 15% from a year ago.
COVID-19 is responsible for some of this. Fewer homes are on the market than before the pandemic struck, and much of the nation faces a similar rise in prices. Re/Max reports inventory is down 45.2% nationwide over this time a year ago. As the pandemic ends, some of the crunch will level out.
In addition, state lawmakers recently made it easier for people to rent parts of their homes — something that may help ease the housing shortage over time. And Robison pointed to signs that pandemic-induced inflation may be subsiding, as costs seem to have stabilized a bit over the last month.
But then, he said, “We’ve had a trend for a long time of people wanting to move to Utah. We already had an inventory issue a year ago, before COVID.” The housing crunch here isn’t all pandemic-related.
It’s not too late for Utah to exit the highway to San Francisco, but it’s going to take a lot of construction, a lot of innovative thinking and a collective resolve to grow up, instead of out.
Robison is optimistic cities will understand that housing restrictions keep children and elderly relatives from resettling to neighborhoods nearby, even as they push prices higher.
“I’m optimistic we can solve the issue,” he said. “We just need a lot more housing right now.”