Every month, Dale Gunther (vice chairman of the board of People’s Utah Bancorp, the holding company for Bank of American Fork), writes an article for The Enterprise newspaper. Here’s his article that ran in the May 16 edition.
Coming soon: Housing shortage
By Dale Gunther
This is actually a very real possibility. While there seems to be excess residential housing inventory, the current rate of homebuilding is not sufficient to meet housing needs for the state’s expected population growth.
According to the Bureau of Economic and Business Research at the University of Utah, just over 5,000 single-family building permits were issued in 2010—a far cry short of the 15,000 new households that are projected to crop up in the state for each of the next eight years. It doesn’t take a Ph.D. in math to calculate that there will be a housing boom coming soon.
Demand is already building as frugal buyers continue waiting for the market to bottom out. Once they feel it has—perhaps when interest rates begin to rise and employment steadies—there should be an increase in home-buying activity, ultimately resulting in increased home prices.
Back in the third quarter of 2007, homes along the Wasatch Front were selling for a median price of $246,600 according to the Bureau of Economic and Business Research at the University of Utah. At the end of 2010, the median price of an existing home had fallen to $199,200—a decrease of 19% in three years, due in part to diminishing home values and fewer million-dollar homes being built. I suspect home prices can go up at the same rate just as quickly, or more quickly, as they went down.
Steadying employment will also have an impact on the real estate market. This year, the Utah Department of Workforce Services estimates 20,000 jobs will be created in Utah, or about half of the state’s historical average. Next year’s job growth is estimated at 30,000—a bit closer to the norm. New jobs mean more in-migration, more disposable income and a need for more housing.
So what does this all mean for you?
It means that if you are waiting to buy a home, whether an existing or newly constructed structure, time is running out. Most economists agree that we are at the bottom of this recession and that home prices, building costs and interest rates have nowhere to go but up.
Now is a great time to talk to a community banker about your financial qualifications to build or buy a new home. Your home will be an investment in real estate, but even more importantly, it will be an investment in the development of family.
Years ago, I heard an educator say something like this: “If I were to build a university, first I would build the dormitory where students learn life’s lessons. Next I would build the library where students may read great literature. Last I would build the classrooms.”
Your home may be a model of such a university—the living and learning place for your children. Don’t let today’s opportunity be tomorrow’s regrets. Build or buy a home now and create your own economic recovery.
Dale Gunther is vice chairman of the board of People’s Utah Bancorp, the holding company for Bank of American Fork , which is an Equal Housing Lender and Member FDIC. At the start of his 16-year tenure as CEO at Bank of American Fork, the bank had two branches and $80 million in assets; it now has 12 branches and more than $840 million in assets. Dale has served as chairman of the Utah Bankers Association and currently serves as an American Fork city councilman.