CHARTS: Interest Rates and Affordable Housing

CHARTS: Interest Rates and Affordable Housing

The news cycle has been filled with stories of the affordable housing problem we are experiencing here in Utah. The problem is nationwide but there are some unique features to our problems locally. First, a lack of land prevents the continued suburban sprawl that is the hallmark of the last 60 years of Utah’s development. Compounding the problem is that zoning laws in most of Utah’s small municipalities shun higher density housing projects which could alleviate the imbalance of supply and demand for housing.


Despite these macro forces creating house prices that seem out of reach for most people, there are some things happening in the market that are allowing cracks of light through the gloom.  In April I posted a video sharing some charts showing that housing affordability may have seen its worst days and we are now turning the corner to improvement.  The numbers are in for May and it appears that the figures continue to support this hypothesis.


Utah Affordable Housing Chart


The period between November 2018 and today has seen the biggest improvement in affordable housing since 2014.  While the the cost of owning a home is still elevated by historical comparison, the trend appears to be moving in the right direction.


So why are things moving this direction?  The answer is interest rates.  Here is chart showing 30-year mortgage rate movement since December 2018:



As you can see, the trend is clearly downward.  It’s worth noting too that this trend isn’t just a casual drift lower either.  It is a significant slump toward lower rates.


So will affordability continue to improve if rates keep declining?  My hunch is yes.  But, rates can’t continue to go down forever.  They are already very low.  My feeling is that today’s lower rates are a front runner to a slowdown in our economy that will ultimately tap the breaks on the white-hot housing market that has become the norm in Utah for the past several years.  A slowdown in demand should keep housing prices from spiraling out of control and give buyers a window of opportunity that has remained elusive until now.


So, if you are thinking about shopping for a home, CONTACT ME, and let’s see what affordable opportunities are available for you in today’s marketplace.