Thursday, January 2, 2025
The housing shortage will continue into 2025 with high interest rates and low supply.
Urban Living
Posted By Babs De Lay on January 2, 2025, 4:00 AM
Happy 2025! Another year has passed and sad to say, we're moving into another year facing a local and national housing crisis.
Looking at data around the nation, Zillow says we're down 4.5 million homes; Freddie Mac says 3.7 million. New housing starts were down in the fall and housing prices and rents are higher than ever. Ugh.
What continues to cause this problem? There are several issues that continue to plague us:
1. Inflation is slowing but not enough to bring down mortgage rates. Folks who don't follow rates on a regular basis and aren't shopping for a home loan are always surprised when I share that interest rates have not substantially dropped even though the Federal Reserve has lowered the prime rate twice in its last two meetings.
2. Millions of people took advantage of unreal mortgage rates in 2021. The lowest interest rates ever on record in the United States were recorded when the Federal Reserve's response to the COVID-19 pandemic caused mortgage rates to plummet and 30-year mortgages went as low as 2.5% for a 30-year loan. Potential sellers these days have little interest in putting their homes up for sale and trading for another property with a 7% mortgage. The National Association of Realtors' chief economist said recently, "Household equity in real estate is at a record high. This means there has been a huge increase in wealth for realtors' past clients, to the tune of $35 trillion." He also pointed out the glaring difference between the estimated net worth of homeowners nationally ($415,000) and renters ($10,000) in 2024.
3. Home prices around the country went up more than 30% from 2020 to 2024, due to extremely low inventory for potential buyers. Like any commodity, if there's a shortage then prices go up and up until more supply is available. Likewise, rents went up 20% or more. Many landlords switched to renting out their properties to the Airbnb crowd, which has contributed to less rentals on the market.
4. The price of building homes has skyrocketed since the COVID-19 pandemic, with materials and labor jumping up each month. Lenders also aren't giving any great deals out there to developers, although it's easier to get a loan to build an apartment building than new condos. Salt Lake City has a huge shortage of condo inventory, but townhouses are popping up all over. Sadly, seniors do not want three levels of stairs and senior housing is really at a crisis point here. I have many Boomer clients who would love to move to one-level living but finding this kind of housing is rare in the Salt Lake Valley—although much more common in Washington County.
It's impossible to predict what President-elect Donald Trump's policies will have on our economy. His promises are grandiose—I've heard him say he'll cut mortgage interest rates in half and cure our housing shortage. From your lips to God's ears!
About The Author
Babs De Lay
A full-time broker/owner of Urban Utah Homes and Estates, Babs De Lay serves on the Salt Lake City Historic Landmark Commission. A writer and golfer, you'll find them working as a staff guardian at the Temple at Burning Man each year.
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