We made it through 2019 without a recession. This may have come as a surprise to some. Generally, the U.S. economy experiences some sort of recession every four years.
Many people worried that we were long overdue, and plenty were predicting recessions for 2019.
That didn’t happen.
Now most of the economic pundits have reversed their predictions about the direction of the economy. Instead of casting dire forecasts for 2020, they’ve backed off and said that they don’t actually expect a recession this year.
Naturally, there’s still a few nay-sayers and contrarians out there. But as far as Utah’s housing goes, especially if you’re considering moving into one of our 55 and older communities, what should you expect for this year?
Factors Of Our Economy
In 2019, I was surprised when the Fed decided to lower interest rates. I’ve been expecting interest rates to climb up some day. Apparently this isn’t the time. In fact, many are even predicting negative interest rates in the coming decade. I wonder how that will work…
Anyhow, with lower interest rates the mortgage rates have remained steady and cheap. Do you remember when they used to be over 16%?
Low mortgage rates help keep the true cost of homes lower.
This is the real question for most economists right now. Many worry that incomes have not risen fast enough to keep pace with the rising cost of housing. While inflation, as measured by CPI has been fairly steady around 2% for the last few years, which is generally considered a healthy inflation rate, that doesn’t always take into consideration everything we pay for.
If you live in Utah, you have undoubtably been watching the cost of homes rise. This isn’t bad if you already own a home, because your house has likely appreciated in value as well, however if you are renting, then you don’t have that same equity buildup to help you move into a new home.
The nation, and more importantly, Utah, are at historic lows for unemployment. If someone wants a job, there’s someone out there wanting to hire them.
For every industry professional I’ve met with, they all complain about the unavailability of quality workers looking for jobs. We’re all looking to hire, and there just isn’t enough skilled labor out there. This has caused wages to increase as employers constantly seek to get the best labor they can afford.
Naturally, if this trend continues, then affordability should improve as well. But there’s a flip side to this.
Utah has one of the most diverse and healthy economies in the country. This encourages a lot of people to move here from out of state. While wages may be growing, so is our population.
Utah builders continue to build more housing, however the pace of new home construction is still lagging the pace of growth in Utah and Salt Lake Counties. This means that there is still constant pressure on housing demand, which keeps pushing prices higher.
Oil prices have remained steady over the last few years, which is healthy for an economy. When oil prices spike higher, that can often be a warning sign. GDP is still looking healthy, and the only real bubbles that might be inflating are public stock prices, because of the trend to invest more in ETF’s than in individual stocks.
In my opinion, and I stress that this is an opinion only, and should not be construed as professional advice, and should not be used for any sort of financial planning purposes, I believe that Utah’s economy, as it relates to the housing market is going to be fairly steady through 2020, similar to what it was during 2019.
There is a heavy bit of pressure from what we are calling price fatigue, where homebuyers are resistant to increasing housing prices.
This has caused many home prices in Utah to plateau, and in some instances even decrease. If I were to offer a prediction, I would think that homes will continue to remain flat for the rest of 2020. There will be some deals to be found out there, which might make this an ideal year to consider moving, but I wouldn’t expect your current house get the bidding wars that you’ve heard so much about over the last couple years.
As far as 2021, we’ll cross that bridge when we get there. With this being an election year, who knows what will really happen next year, though I can only imagine, regardless of your political persuasions, that President Trump will want to keep the economy as strong as possible this year, so that it doesn’t hurt his chances for re-election.