Housing Market Outlook: August 2021 (Episode 36) S3 E6

This is how we see the market from here and beyond.

1:15 – The bubble’s bursting! Are we in a bubble? Is it 2008 all over again? “Underwater” means your home is worth more than you owe. People believe they see a similar trend to 2008, so we must be in a bubble.
3:45 – Personal story of a friend who didn’t buy, and wished they did. Values outpaced their ability to save.
5:22 – There are solid economics driving the Utah market. Utah jobs are up in a big way.
6:07 – Supply and demand. There aren’t enough homes for the people who want to buy them. Inventory graph. Almost the entire home inventory was sold in Q3 of 2020. What do you pay for a hamburger in Disneyland? That’s how home prices work as well! The median price is now at $440,000!
7:49 – Joel, why are townhomes the perfect economic barometer? They are all comparable — they have all the same characteristics. You can use them to identify trends.
9:45 – Housing starts. These are permits to put a house on a lot. 2007: 2.3 million housing starts, 2009, 550,000 housing starts. We were “underbuilding” by over a million homes per year. That lack of inventory kept building up until 2020.
12:30 – What happened to construction workers? People shifted away from the construction industry, creating a shortage of trades workers. Everyone who owned a home for the last few years is an investor now – they all have at least $250,000!
14:20 – Buying power is heavily influenced by interest rates. 3% interest rate vs a 4% interest rate. It leads to a $60,000 of purchasing power! Affordability isn’t getting better. Five years ago, 70% of renters could afford to purchase a home, in 2021, that number is down to 20%.
18:35 – Tech is exploding in Utah. People are coming to Utah in droves, which mean the demand for housing is increasing. This is a great place to invest for appreciation. Idaho was the only state that out-appreciated Utah.
20:17 – When should I buy? You cannot time the market, quit trying!
21:07 – Rates are likely to increase, what do I do? Own something that’s not money. Own something that’s worth money.
22:20 – But the market is softening (a little), especially since late June. A lot more price drops on homes, but doesn’t mean we’re crashing! The market is correcting. Buyer fatigue, increase of inventory, the get-into-school push — these are all factors of a softening seller’s market. You see it in selling price to original list price (over 100% is a seller’s market), and you can see it in the days on market statistics. It was 22 in 2019, and it was 6 in July…but that number is increasing.
27:45 – Commercial activity is still in the works. They’re less concerned about trends.
29:41 – What’d we learn today?
32:10 – Bloopers

*No economics were harmed in the filming of this real estate discussion.

Please contact us to tell us you love us, you want to hire us! Call or text:

Joel Frost is an Appraiser with
ExcelAppraise
Reach him on Twitter @JustAskJoel
https://twitter.com/justaskjoel

Realtors with Hive Collective at Presidio Real Estate:
Tyler Cazier: 801-210-0230
Aric Wiszt: 801-228-7687‬

Lender with Elite Team at Security Home Mortgage:
NMLS: 178787
Jason Christiansen: 801-669-7271
NMLS: 240472

A Production with Security Home Mortgage’s Jason Christiansen, and Hive Collective at Presidio’s Tyler Cazier and “Mr. Suit” Aric Wiszt.

Utah’s economy, like every economy, follows jobs. Utah is in pretty good shape at 2.6% unemployment.
Trends of household growth in Utah. Total households was 70k in the 1990s, then 100k in the 2000s, and 141k in the 2010s. Steady growth in households means we need steady growth of housing starts. When we lag housing starts relative to households, we get a shortage or “gap”. We’ve been growing our gap since 2009. In 2020, we ran out of houses, and the market exploded.
Inventory of homes on the market (listed) and total homes sold. Note the collision in Q3 2020 — virtually every home on the market was sold.
Median Home price climbed to $440,000 in Q2 2021.
Utah Housing Starts have been under built since 2008.
US Housing starts were at 2.3 million in 2007, then in 2009, they were 550,000 (75% less). In 2021, we’ve recovered to 1.7 million, but that is still a shortfall from the 2.3 million homes per year we needed since 2003.
One way to judge how “seller” a seller market is is to look at the Price homes sold at relative to their original listing price. Are they selling over ask price? That’s a seller market. Seller for 6% more than ask price? That’s a REALLY strong seller market.

Another metric is Cumulative Days on Market (CDOM). This is how long houses were available before going under contract. The fewer the days the house is available before going under contract indicates a stronger seller market. For contrast, July 2019 was 22 days.
What happened to Utah’s construction workers? Many of them switched their profession. Rather than fight for a scarce, low-paying, unreliable job in a dying industry, several tradesmen (plumbers, electricians, framers, etc) just left the industry or never entered it. This led to an inevitable construction labor shortage just as inventory bottomed out.
Buying power changes a LOT from 3% to 4$ interest rate. 1% point of interest can mean $240 / month…a car payment!
Idaho led the country with 23.7% YOY price appreciation. Utah was right behind them at 19.2%.
“You cannot time the market. Quit trying.” — Tyler Cazier
2021 and 2022 projected mortgage rates look like they’re going to be higher.
Back to top