Where do you see the Salt Lake City market headed?

Question

Where do you think the Salt Lake metro area is headed for single-family properties?

A few data points I've been observing include:

• Population and household growth are forecasted to remain positive, with the rates of growth forecasted to reduce over time: https://gardner.utah.edu/demog...

• Q1 2022 construction permits saw the highest growth in apartments, with single-family home permits in decline: https://gardner.utah.edu/wp-co...

• Salt Lake City is currently proposing changes to its ADU ordinance, allowing for more density to be added to existing properties: https://www.slc.gov/planning/2...

• Salt Lake County is seeing considerable growth in STRs (https://gardner.utah.edu/blog-...), but the Salt Lake City FAQ indicates that areas zoned for residential should not be used for STRs (https://www.slc.gov/planning/f...). (Doesn't take much searching on Airbnb to see them happening though...)

With the landscape changing, how are you thinking about the 10, 20, or 30+ year real estate future for the area?

Andy Jenkins · Answer

I'm really bullish on long term appreciation for the Salt Lake Valley. The valley is filling up, very little buildable land left, there are mountains on both sides, relatively high birth rate, and lots of people moving here for the diverse economy and proximity to the outdoors, all mean upwards pressure on prices. Even if a significant number of people leave because of the death dust from the drying lake (gotta keep the alfalfa farmers happy), there's still going to be more people than property for the foreseeable future. Just my opinion.

Leo R. · Answer

@Doug Norton other critical issues include: decreasing availability of water and increasingly poor air quality, and an impending earthquake that is anticipated to cause significant total loss rates for the un-reinforced masonry buildings that make up much of the housing stock in the city...obviously, nobody knows when that will occur, but geologists generally agree that the earthquake is a matter of "when", not "if" (yet, my impression is that very few property owners have earthquake insurance)...it's hard to know how these issues will play out, but there is evidence that one or more of these issues will become un-ignorable on a 10-30+ year timeline.

ADUs are an interesting prospect, but the last time I got quotes for building an ADU in SLC, the numbers really didn't make much sense in terms of ROI as a long term rental...of course, people build ADUs for reasons other than ROI, so it will be interesting to see what happens...

Between the world-class outdoor attractions, events like Sundance Film Fest, and all the other attractions of the city and surrounding area, I would think that demand for STRs could be pretty huge...the city doesn't allow STRs, but as you mentioned, that doesn't stop people from doing them, and my impression is that some folks have cleaned up using ADUs as STRs...

As with any place, the SLC RE market is highly localized, and there's a solid argument that the desirable neighborhoods (the Aves, the U, Sugarhouse, E Millcreek, and most stuff on the E side) will always be in high demand--everyone wants to live in these areas, and there's limited supply.  On the flip side, less desirable neighborhoods could get hit pretty hard in a market downturn (and there's evidence we may be in the midst of a downturn right now).

For instance, this report showed that in January, inventory was about 200 houses under 700k, and now we're at around 1100 houses under 700k. Avg days on market had been less than 7 days for most categories a few months ago, and now it's around 20-30 days for some price categories.   https://www.biggerpockets.com/...

Having said that, the "less desirable" neighborhoods went on a huge bull run over the last couple years--I saw data a while ago that "less desirable" areas like West Valley City and Rose Park had more appreciation last year than highly coveted areas like Sugarhouse...My subjective impression is that the highly desirable areas like Sugarhouse, E. Millcreek, the Aves etc. have become so expensive that most "normal" buyers have been priced out of those neighborhoods, and have switched their focus to areas like W. Valley and Rose Park--driving up demand and prices in those areas.

To that point: I just did a zillow search for single fam houses under $500k inside the interstate "beltway" (N of I80, E of I15), and there were a grand total of....get ready for it.....THREE houses! (All were only 2 br / 1 ba, and all were either on, or right next to four-lane highway or interstate...none were in particularly desirable neighborhoods).

Nationally, the tech sector has been hit pretty hard over the last 12 months, and could continue to struggle as long as interest rates keep climbing (which they probably will for the foreseeable future).  ...I don't know how much this will impact tech sector employment and housing demand in SLC specifically, but you'd think it would have some effect (SLC has a pretty multi-faceted economy, but tech has become a pretty decent piece of that pie in recent years)...

Since I came to SLC, I've seen the city change pretty rapidly in a relatively short period of time. The first time I ever rented a property to tenants in SLC, about 50% of the applicants were native-born Utah people...today, I'd say that only about 5% are native Utahns, and the other 95% are people moving here from all over the country...so, anecdotally, it does seem like we've been experiencing a significant influx of people moving here (and the population growth has been well-documented).

SLC GDP has increased quite a bit over the last 20 years--as you can see here: https://fred.stlouisfed.org/se...

SLC real estate also did well over the last 20 years--going on a serious bull run from about 2015-2022:  https://fred.stlouisfed.org/se...

Over the last 12 months, I've heard credible arguments that SLC is a bubble about to burst, that it will simply plateau for a couple years, or that it will continue on a bull run for the foreseeable future...so, who knows?

Good luck out there!