Salt Lake City and Denver have more in common than the fact they are big cities, near big mountains.
According to new realtor.com data, Salt Lake City’s housing market is seeing the same rapid growth patterns that occurred in Denver in early 2015 and 2016 and that drove the city to the top of the nation’s hot housing markets.
The Salt Lake City metropolitan area is projected to have one of the strongest housing markets in the country in 2018, with home prices and sales expected to reach 4.5 percent and 4.6 percent growth, respectively, over last year. Just like Denver, the factors driving its strength are a growing economy, relative affordability and an increasing millennial population. In fact, with home prices growing three times faster and supply moving a full week faster in the span of a year, Salt Lake City resembles Denver at the beginning of its boom.
“In just a handful of years, an influx of jobs and millennials drove Denver’shousing market from strong and stable to rising like the Rockies,” said Javier Vivas, director of economic research for realtor.com®. “If Salt Lake City is able to continue generating jobs and attracting well-educated young people, the market has the potential to continue to climb to ‘Mile High City’-type heights.”
A primary cause of Salt Lake City’s momentum is its robust economic picture and growing population. The local Salt Lake City economy is growing at 9 percent year-over-year, more than two times faster than the national average. The city is also adding jobs at nearly three times the overall U.S. pace, with employment growing at 3.6 percent year-over-year. Household incomes in the area are growing at 5.4 percent year-over-year, nearly twice the rate for the country as a whole. Last year, population topped 3 million for the first time, which has contributed to an uptick in demand in the market.
Despite its strong economy, Salt Lake City remains relatively affordable, particularly in comparison to other hot mid-to-large cities. The median sales price in Salt Lake City at the end of 2017 was $273,000, which is $20,000, $70,000 and $90,000 lower than other growing markets of Austin, Texas; Portland, Ore., and Denver, respectively. A median income household in Salt Lake City can buy a median-priced home with 32 percent of its annual income, roughly in-line with the generally accepted maximum.
Market dynamics in Salt Lake City are being driven by its larger-than-average, and growing, proportion of millennials. In fact, its millennial population is 1.3 times higher than the U.S. average and made up 46 percent of its mortgages in 2017, beating the U.S. average by 9 percent. Looking at realtor.com® search activity, Salt Lake City has been drawing interest from Los Angeles, Denver, Las Vegas and San Francisco, showing that it is likely absorbing unquenched millennial demand from these hot markets.
Although realtor.com® predicts that demand will be strong and constant in Salt Lake City over the next few years, the longer-term outlook for the city’s housing market depends on its ability to continue to create jobs for young professionals and drive housing market demand. If it’s successful at doing so – as Denver so far has been – then the Denver market’s current conditions provide a reasonable snapshot of what is in store for Salt Lake City.