Will the housing market in Salt Lake continue to grow in 2022? If so, how much more growth can be sustained before another housing market bubble bursts? How far will interest rates rise over the year and how will we deal with a historic shortage of housing stock? Any predictions on which way the housing market is heading this year depends on the answers to these questions. After considering those answers carefully, here are some of the predictions we have about the housing market in Salt Lake for 2022.

Going into 2022 Strong

As we reported last month, 2021 was a very healthy housing market for the Salt Lake area. The hot streak continued over the year and was strong going into the first quarter of 2022. The best news for sellers was the increase in the sales prices of single-family homes over the year. It’s been a sellers’ market for sure, with homeowners getting many times over their asking price. This was due partly to mortgage rates which have been kept low. The pandemic also forced many people to rethink their living situations. The result was more homes sold for more money and with less time on the market. For that to continue, however, several things need to happen. For one, mortgage rates need to stay low and the housing supply must meet demand.

How High Will Mortgage Rates Rise?

It’s not a question of will the Federal Reserve raise mortgage interest rates in 2022. The questions are when and by how much? Many experts believe that mortgage rates will likely go up to about 3.875 percent and 4.375 in 2022. This hike is something the Fed will do on short-term interest rates probably twice over the course of the year. Keep in mind that a 1 percent increase to interest rates has the same impact as an 11 percent increase to home prices. Therefore, via home price appreciation and interest rate increases homes will be 15-20 percent less affordable in 2022.

Is the Hot Streak Cooling Off?

The numbers for the 2021 housing market in Salt Lake grew but at a slower rate than they had over the previous three quarters. That said, sales prices rose even as the median days on the market increased. So, yes, 2021 saw growth throughout the year and ended on a high note even as speculation of a cooling down period started to creep in. While many experts believe that the rate of home appreciation will slow, from the 26.9 percent increase of 2021 to a rate of between ten and 12 percent for 2022.

This muted expectation should come as no surprise considering the large gains of last year. As we head into the spring, the market is still struggling to meet demand with not enough houses for buyers looking to lock in low rates. I think we are going to have another tight housing market in 2022 with low inventory, tons of competition, and lots of frustration from buyers. Sellers will get top dollar but will struggle to find something they want with which to replace their current residence.

Poised for Growth in 2022

Some good news for the Salt Lake area is that we are the number one housing market poised for growth in 2022, projecting a 15.2 percent year-over-year increase in sales and an 8.5 percent increase in prices. Salt Lake outperforms Boise’s projections, which call for annual sales growth of 12.9 percent and annual price growth of 7.9 percent.

To take advantage of this growth, buyers need to be ready to buy now. Doing so will get them an approximate increase in home value of between ten and 16 percent. Right now real estate is the safest investment you can make. 

No Crash is Coming?

Even though many folks in the industry are suggesting that we are in or near a bubble, for what it’s worth, I do not believe the market will crash. Even if there is a dramatic slowing down, it won’t be like the market crash of 2008. What we were facing in that market crash was almost entirely related to unhealthy mortgages being created. People were qualifying on risky factors like proposed appreciation and stated income.

Simply put, the 2008 market crash resulted in homeowners not being able to make their monthly mortgage payments due to creative financial packages such as interest-only payments. This led to over-leveraged buyers who could not sell their property and had to short sale or foreclose. Additionally, banks were then left with properties that they couldn’t sell and they took massive losses. This resulted in losses for everyone. 

The current market is much different. Lenders got hurt so badly last time and are more regulated now, so they are not granting risky loans. If a homeowner is forced to foreclose in the current market they would be left with a marketable property. This would help the inventory issue we currently find ourselves in. 

While I don’t predict a steep decline anytime soon there will no doubt be a cooling-off period after the hot market of the recent past. Rates should go up this year, and that normally slows prices down.

Unfortunately, housing inventory is so low right now that I don’t think we will see as much of a slow down in order to regulate the market this year. The housing forecast this year from the Salt Lake Board of Realtors predicts appreciation in the double digits again. There just are not enough houses available and Utah is growing so fast it’s hard to keep up. Hopefully an evening out is more prevalent next year.

Pain for First-Time Buyers

I believe the current housing situation hurts first-time homebuyers the most. Existing homeowners generally have something first-time buyers don’t and that is capital/equity—usually in the form of the home they are selling. Everyone is saying, “If I sell what if I can’t afford the next house? Everything costs tens of thousands more than I want to pay”. Yes, that’s true, but you probably have tens of thousands in equity you wouldn’t normally have either. It will be a proportional move, up or down. 

First-time homebuyers don’t have that option. They need to save or be gifted all of their cash to close. The only recommendation I have is to try and get in as soon as you can. There is no indicator that the market is going to crash and you can get housing for less. I realize that is not an option for all, but if you are in a scenario where you could buy a home, do it and do it quickly. You don’t need 20 percent down. There are down payment assistance programs out there and I am a resource to help you plan. You will likely need to have some money to contribute, but if you can afford rents, which are also increasing rapidly, you can likely afford a home.