Housing Affordability in Salt Lake County 2003-2013

From the desk of Kevin Coyle, March 5, 2014:

Home prices in SLC have increased since early 2012, yet homes are still more affordable now than they were from 2003-2009.  Yes 2010-2012 was a better time to buy than now, but you can’t go back in time and the economy is better now than it was then.

A common way to measure and compare the cost of home ownership from year to year, is by looking at the Mortgage Purchasing Power.

Mortgage Purchasing Power compares the average sale price of a home and interest rate for a 30-year mortgage from one year to the next.  Price and rate give you a monthly payment.

You also consider inflation so all payments are compared in 2013 U.S. dollars, and the size of the average home sold during that year.

The lower the cost per square foot, the greater the Mortgage Purchasing Power a buyer has.

Housing Affordability in Salt Lake County 2003 – 2013:

SL County  Interest     Monthly     Payment  Average    Cost
Year     Sale Price    Rate       Payment    in 2013 $   Sq.Ft.   per Sq Ft
2003:   $165,000      6.2%         $808        $1,026      2,150       $0.48
2004:   $169,000      5.8%         $793           $983      2,132       $0.46
2005:   $191,000      5.8%         $897        $1,076      2,174       $0.49
2006:   $244,000      6.4%      $1,221        $1,416      2,193       $0.65
2007:   $256,000      6.4%      $1,281        $1,448      2,147       $0.67
2008:   $247,000      6.0%      $1,185        $1,292      2,266       $.057
2009:   $233,000      5.1%      $1,012        $1,083      2,354       $0.46
2010:   $230,000      4.4%         $921           $985      2,401       $0.41
2011:   $197,000      4.1%         $762           $793      2,360       $0.34
2012:   $218,000      3.5%         $783           $795      2,291       $0.35
2013:   $253,000      4.5%      $1,026        $1,026      2,343       $0.44

At $0.44/square foot in 2013, the cost of home ownership was 34% less than it was in 2007 when it was at $0.67/square foot.

Right now interest rates are still historically low, but they are predicted to increase this year.  Today, a 30-year mortgage is at about 4.32% and a 15-year is at about 3.33%.  Lawrence Yun, chief economist for the National Association of Realtors, predicts that by the end of 2014, the 30-year mortgage rate could be near 5.4% due to a “tightening mode” by the Federal Reserve.

The predictions for the 2014 Salt Lake County residential housing market are positive and inventory levels in most price ranges are very low.  James Wood, director of the Bureau of Economic and Business Research at the University of Utah, predicts that the home prices in Salt Lake County will increase 5% to 7% in 2014.  My opinion is that this is a conservative estimate in most areas and price ranges.

If you currently own a home and are considering a move in the next couple years, you may want to make a move now. If you wait a couple years to make a move, the value of your home will probably be greater, but then so will the value of the home you want to buy.

If you don’t plan to sell for the next few years, and your interest rate is more than 1% higher than it is now, you should probably look into refinancing before interest rates go up.

If you are a first time buyer, rents in Salt Lake County have increased 12% from January 2012 to December 2013.  Again, if you want to buy a home, it may be better to act sooner than later.


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