2022 SLC Real Estate Market Forecast
/One of the most common few questions I get asked regularly are 1. What will real estate prices do this year? 2. Are we in a housing bubble? And 3. Should I wait for house prices to drop before I buy a home? Let’s discuss.
Much of what I’m going to share here was research and delivered by James Wood, Ivory-buyer Senior Fellow of the Ken C. Gardner Policy Institute of the David Eccles School of Business at the University of Utah. I will link his report at the end.
What will real estate prices do this year?
First, let’s visit price changes in 2021 because they were significant. Last year prices in the state of Utah rose by 27%! That shattered the old record of 20% set way back in 1978! (That pained me to say “way back.” I was born that year!) As an agent it was wild to see prices move up so rapidly and at such a high rate. It was cool to see sellers get more money than expected and it was also hard to watch buyers have to readjust and lower their expectations.
This year it’s expected that prices will continue to go up, but at a bit slower rate. We are still experiencing a housing shortage so that will continue to push demand. But affordability and interest rates should help to temper the amount prices rise. It is expected they will rise between 10-20% this year.
Are we in a housing bubble?
I’m going to directly quote James Wood’s report here because he explains it much better than I can.
“The 2008 financial crisis was precipitated, in large part, by loosened banking regulations, reckless lending practices (subprime loans), and risky financial innovations (mortgage-backed securities and collateralized debt obligations), all of which led to a dangerously leveraged global financial market. These conditions were not present in 2021. By far, the most likely outcome for housing prices in Utah over the next two to three years is a period of price moderation similar to what occurred after price accelerations in the late 1970s and the mid-1990s...an extended period of price declines created by a bursting bubble is very unlikely.”
Should I wait for house prices to drop before I buy a home?
There is no indication that prices will fall drastically in the near future. What we do know is that the Federal Reserve has said they will begin to raise interest rates. Higher interest rates mean higher house payments. If you wait to buy in the hopes that prices will “moderate,” they may do that, but when they do, what will interest rates be? We don’t know exactly, but we do know that they will creep higher over the next couple years. For this year, the average interest rate based on the forecast of seven different organizations is 3.55%. That’s still a great rate. When I bought my first house in 2003, my interest rate was 6.25% so that seems like a steal to me.
Knowing that those interest rates will keep going up and prices probably will for at least this year too, waiting for a home may mean you will pay yet higher. Buying now locks you in at these historically low rates and you start earning equity as the market continues to increase.
If you are ready to start looking for your next home or to capitalize on this high prices and sell, give me a call and we’ll get started!