I’m constantly being asked “when are home prices going to drop?” I’m not sure that’s actually the question to be asked. How about “when are homes going to be affordable again?” There’s a difference in the somewhere, but it’s a bit complicated.
The first part of the answer is fairly basic. We are dealing with a serious shortage of housing in this country, and in Utah specifically. The basic rule of supply would suggest that if there aren’t enough homes to buy, the ones that ARE available will cost more. So, why the shortage? That one’s fairly simple. We stopped building during the crash or ’09-’12. People weren’t buying homes because they couldn’t. Builders/contractors left the business in droves because they had to get “real” jobs to feed their families. By the time the economy got healthy again, those folks had left the business for good. Again, a scarcity in builders means that prices go up.
How about the cost to build. Over the last decade, prices for EVERYTHING you buy has gone up. That includes building materials like wood, steel, petroleum products like asphalt shingles and the fuel to transport things, appliances, glass, you name it. It also includes labor. Finally, the cost of land has gone up, again, because it’s becoming scarcer. That’s not even adding in the cost of government regulation. The Kem Gardner Institute at the U of U suggest that regulation is as much as 20% of the cost of a new home.
Finally, the ABILITY to purchase has not kept up with the cost. Have your wages gone up anywhere near as much or as fast as the costs of the things you buy? Not likely.
There are ton of problems with housing affordability right now beyond what I’ve mentioned. However, it’s not all doom and gloom. Finally, someone besides builders and Realtors have recognized the issue for what it is. Our Governor & Legislature in Utah are working to prioritize housing affordability. Some of our local governments are trying to find solutions to get rid of some of the excess regulation. Financial markets are finding creative ways to get you into that first home. In the meantime, there are still homes being built, bought and sold every day. The best time to I get into the game is now. Call us today and let us show you how!