Utah’s real estate market has been supercharged by the COVID-19 pandemic, driven by historically low interest rates and low unemployment rates.
The state’s housing market is first in the nation for pace of job growth and features low unemployment and mortgage rates, minimal mortgage delinquencies and low state and local taxes. All these trends portend a strong housing market in Utah. Salt Lake City is the center point of this growth and recovery. Utah’s capital city saw the second-largest increase in home sale prices in the country over the past year — a jump from $385,000 in September 2020 to $490,000 in September 2021.
Prices have risen so quickly that Provo, Salt Lake City and Ogden were all recently ranked among the top 10 of the most overpriced housing markets in the country. While the meteoric growth in prices isn’t expected to continue, this trend has given real estate investors equity in SFR properties while opening the door for multifamily investments in the future.
The Salt Lake City market is filled with opportunity for real estate investors looking for investment properties in Utah and holds the chance for different investment strategies to be successful.
That makes it a great place for investors looking to buy and hold investment properties. This investment strategy works well for properties with rental values in the mid-range, all the way up to homes in the luxury market. This strategic investment method may not lead to as much cash-on-cash value, but it tends to bring in more stable tenants with higher income, better credit scores and a longer tenancy.
With one of the best business environments and economies in the nation, Salt Lake City is a popular choice for industries looking to start or expand a company because of its business-friendly environment, foreign trade zone, government incentives and development-ready sites.
Perhaps the most impressive thing about Salt Lake City’s economy is its unemployment rate. Pre-COVID lockdowns — March 2020 — Salt Lake City’s unemployment rate sat at 2.8 percent. By April 2020, when most of the country was on lockdown, the city’s unemployment rate had spiked to nearly 11 percent. By May 2021, the unemployment rate had dropped to pre-pandemic levels. In September 2021, the city’s unemployment rate had fallen to less than 2 percent. For investors, Salt Lake City’s unemployment rate shows a quickly rebounding economy, which means they have great potential for profit.
The Salt Lake City real estate market has enjoyed a great run for the better part of a decade. In the nine years real estate in Salt Lake City has taken to recover from the Great Recession, home values have nearly doubled without demand waning. Perhaps even more important is the momentum being leveraged in 2021.
With the right exit strategy, now is the perfect time to invest in the Salt Lake City real estate market. Specifically, the new market landscape looks to lean heavily in favor of long-term investors and those who position themselves well now will be glad they did in just a few short years.
Multifamily real estate investing has also been on fire this year. In October 2021, the Multifamily Production Index (MPI) increased five points to 53 while the Multifamily Occupancy Index (MOI) increased by five points, up to 75 — the highest reading since the inception of the index in 2003. (MPI measures builder and developer sentiment about current conditions in the apartment and condo market. MOI measures the multifamily housing industry’s perception of occupancies in existing apartments.)
Salt Lake City’s multifamily market is no exception to this nationwide trend. Multifamily rental growth in Salt Lake City ranks 23rd of 98 markets nationwide. On a year-over-year basis, Salt Lake City multifamily rents increased 18 percent from $1,243 in October 2020 to $1,467 in October 2021.
In 2020, more than 5,000 units were added to the city’s existing multifamily stock. According to the Yardi Matrix fall multifamily report, Salt Lake City had 13,636 units under construction as of August 2021. By August 2022, more than 7,500 units are projected to be completed.
Despite the number of multifamily units under construction, Salt Lake City’s rental market has a supply-and-demand disconnect.
The market for available rentals in Utah’s capital is tighter than ever and as a record number of apartment buildings are being built, real estate experts say it could be a year or more before the new housing supply makes a dent in the city’s rental market.
Even with a tight market and rental increases across all classes, Salt Lake City is relatively affordable for renters — a huge plus for investors. Even with rent increases, Salt Lake City’s renter population isn’t being priced out, which creates longevity in tenancy and additional income for investors. The net result is one of the nation’s strongest housing markets, and a market that more and more real estate investors will find attractive.
Robert Parsley is the director of business development at Lima One Capital.