The housing market took a real beating during the Great Recession. To say it has rebounded in the years since is an understatement. In some places, like Salt Lake City, Utah, housing prices are on pace to reach new records in 2020. Experts say it is all due to changing demographics and economics.
Median prices for single-family homes in Salt Lake City could reach $400,000 this year. That represents a 5% increase. Prices for townhouses and condominiums are expected to increase some 10% in 2020. They could eclipse the $300,000-mark in 2021.
Even more amazing is the fact that median prices have risen more than 90% in the last nine years. And it’s not just in Salt Lake City; it is statewide. Other states have seen similar increases as well. The fact is that the cost of housing just keeps going up.
A New Demographic
So, what is driving housing prices so high? For starters, the industry has a new demographic to work with. While baby boomers and gen Xers have pretty much settled into their housing groove since the Great Recession, millennials are now the key buyers that builders and real estate firms are zeroing in on. Millennials have quite different tastes, and they have different expectations of what they want from housing.
The millennial generation seeks convenience. They like the action of being in the city rather than out in suburbia. As such, land prices in urban areas are skyrocketing, which means housing prices go up the closer you get to the city. The cheapest land is still found in rural areas.
Millennials are also less receptive of the property ladder concept. Rather than being willing to settle for whatever they can buy as a starter home and then moving up, they want to buy their forever home right away. They have to pay more to do so.
It is impossible to talk about rising home prices without discussing economics. And the fact is that the U.S. economy is booming right now. Housing prices cannot escape the inevitable effects of a strong economy. As the economy grows and people earn more, buyers start looking for houses. That’s the way the market works.
For all of the peril the market went through during the Great Recession, it is rebounding now with equal fervor. Indeed, the housing market is a lot like a pendulum. The more the pendulum swings one way, the further it will swing back the other way. Part of what we are seeing now is simply an opposing reaction to the housing crash of the late 2010s.
Mastering the Market
Cities all across the country are looking at housing prices that seem to keep growing with no end in sight. The task at hand now seems to be mastering the market for the benefit of both buyers and sellers. That is no easy task. When prices go up, a certain segment of the buying public is priced out. They need more affordable options, options that builders and landlords are not motivated to provide.
What is happening in Salt Lake City is a microcosm of what’s happening across the country, explains cityhomeCOLLECTIVE, a local real estate and design firm. But they say that the region is managing. Builders are building new homes, cityhomeCOLLECTIVE and their competitors are selling existing stock, and state and city leaders are working on coming up with more affordable housing options.
Higher housing prices are inevitable under the current circumstances. Thanks to changing demographics and economics, prices have nowhere else to go. That is not a bad thing if we can figure out how to master the market.