The housing market in Salt Lake County has definitely been impacted in a big way by the recession which started in 2008. Almost every economic factor there is has been gravely affected. For example, new migration has dropped in a significant manner. The local labor market is reflected by the lack of newcomers. Unemployment in itself is still below the 3% national average and poor growth in the job sector is a real pacesetter for relocation. There is weakness in the demand for housing due to lack of support in migration.
Utah is ranked sixth in the nation where foreclosures have finally reached record high. There has been an avalanche of foreclosures due to the ongoing disarray of the mortgage market. The value of homes has gone under due to the widespread houses just sitting in every city in Utah and the overall prices of family homes are reducing as the years pass by. Even the apartment sector is not doing well at all (Peart, 42). The rents have decreased once again with the lack of migration playing a major role. Even with these conditions of weakness in the market, many continue putting up apartment buildings seemingly not affected by the worsening conditions.
More than anything else, poor economic conditions always or almost affect households with lower income than others. For the first time the state of being homeless is on the rise, evidenced by the many families that are already homeless. Housing that is transitional is just not available and here in Salt Lake City there is scarcity of immigrant housing even with a few immigrant families joining our city every year. The market for buyers such as me has been created by mortgage rates of up to 5%, lower costs of building, too much supply, foreclosures and lower prices (Peart, 44). But even with all these favorable conditions buyers like me have remained cautious making the sales flat. The market with all of its potential has been destroyed by the high rates of unemployment. In the county every city has condominiums, and vacant homes that are only affordable to those households that are able to earn at least 80% of the Area Median Income in the county.
Affordable housing has been pushed by the mortgage and market conditions in the county. And homes are now not as expensive as they used to be some few years back. The favorable market and mortgage terms in the county have enhanced affordability of the homes greatly. However, these conditions do not reduce the need to make sure the impediments to housing that is affordable are removed. The housing prices will eventually take a great turn as much as the conditions are great at the moment. The economic scene in Utah will definitely improve bringing in more newcomers in the state and eventually new home owners hence the demand for housing will go up.
The single family market has great opportunity, but unfortunately it does not share this with the apartment market. There’s availability of special leasing terms, more frequency in concessions and the rents have gone down some with vacancy rates that are much higher. But with meager income gains, poor job formation and high rates of unemployment a favorable and much bigger adjustment is deeply anticipated in our city. There are a few projects still looming in the horizon, hoping to be completed very soon and increase in supply should go a long way in assisting us renters be able to afford the rent.
At Salt Lake City there are several groups of people who opt to rent houses, the first is youngsters of between the ages of 18-25. This group is comprised of individuals that are just beginning their careers. This kind of a household has maybe one or two persons at the most in many cases, hence the income tends to be a bit higher if more than one person is involved. Projects in the market do service this group quite well and there have been few housing projects that are affordable for this group. The second group is the one that is in most need for rental housing that is affordable. The third group is a much needier one and is less catered for.
Generally, market and mortgage conditions have helped boost affordable housing. The median price of a home is $179,000. With 10% down and a 5% mortgage for 360 months, the monthly payment is $954 (excluding taxes and insurance) and with a 5% down payment is $960/month. The lower mortgage payment fits nicely for a family earning $38,200 or 56.6% of the county’s AMI and as for scenario with 5% down payment, the mortgage payment is manageable for a household earning $38,400; again 56.8% AMI (Campbell and Cocco, 1449).
Paying for a house costing $250,000 is a stretch for households earning $53,445 assuming a 10% down payment and excluding taxes, insurance. The AMI is 78.8% which is slightly below the target of 80% AMI (Campbell and Cocco, 1449). In the deep, intense search for an apartment, it is important to first know how much rent, it is one can afford and the income the landlord expects you to have in order to approve of you as a tenant. A typical landlord will very much expect that your annual income be at least forty times the amount you pay per month on rent (Muellbauer and Murphy, 1). So in order to be able to estimate how much rent you will be able to afford just simply divide your total annual income by forty and that will show you how much you can afford to pay per month on rent. I decided it is wise not to spend more than 30% of my yearly income on rent. 30% of one’s yearly income is believed to be sufficient enough and more than affordable to the extent of it fitting all other expenses.
Renting a home in Salt Lake is the best solution, especially if they are not ready emotionally and most of all economically to own a home. Others feel renting is the way to live till they are settled either in the family or at work before choosing to buy a home. Looking at a $3,000 per month apartment, the landlord would require a combined income of $3,000 × 40, which equals $120,000. To determine how much rent one can afford, simply divide your combined annual incomes by 40. Renting has various benefits such as; ease in, moving out, availability of amenities such as laundry services, one has less responsibilities, the landlord is in charge of repairs and maintenance, you only have to part with a security deposit and the down payment is affordable, it’s easy to budget for monthly expenditures and neighbors provide a sense of security.
There are some disadvantages to renting however, such as; lack of tax deductions, rise in the value of property does not earn you a dime, space is determined by the money one has, rent goes up with inflation and there may be restrictions from the landlord or neighbors hence inhibiting your freedom (Davis and Heathcote, 2595).
Being a home owner has various benefits such as; the fact that owning a house is actually a form of savings and this asset as it grows in value then you also grow. As a home owner one has status and a sense of pride in the community and a homeowner has a better credit rating and this is good collateral during emergencies in case one needs a loan. Mortgage payments increase in one’s investments, your monthly payments are basically similar to fixed loans, the house may increase in value adding on to your net worth, as an owner of the house you are more secure even in the days of retirement. A home owner enjoys more space for you and your family; you have the freedom to make adjustments and changes to your house. One’s general wellbeing and that of your family is guaranteed and finally one is more concerned about the happenings in the community and how they can affect their property (Davis and Heathcote, 2598).
There are disadvantages of being a home owner and at some point they may outweigh the benefits for some families. They are; a substantial amount of money is required as down payment, a lot of commitment is needed in owning a home, hence it requires a lot of money time and emotions. If the neighborhood deteriorates at some point the house may decrease in value, as the owner of the home you may be tied down from participating in other activities as all your money is input in the house. Repairs and maintenance may be costly as far as effort, time and money are concerned. Being a home owner requires insurance in case of natural disasters such as floods and this increase on the financial burden, real property taxes could rise dramatically Costs of housing may go way above the budget leading to issues of cash flow in the home, and purchasing of items to fit the new home may increase costs that the family has to bear. Lack of proximity to neighbors may bring about insecurity and the house may look and feel empty once the children grow up and leave to start their own homes. Any hitches in income, such as the loss of employment may limit the money available for home ownership costs.
When choosing a home to rent or buy there are some basic factors such as the safety and security of the neighborhood, the appreciating and the depreciating value of the neighborhood for home owners, the residents in your neighborhood, the appearance of the neighborhood and the location of the neighborhood that matter (Shelby, 13).Other factors to keep in mind is the accessibility to public transport, good streets and roads, convenience to church, school, shopping areas and work, community facilities available in the city such as the recreational facilities like parks, health and sanitation services, fire stations and police stations (Shelby, 16).
Weighing the pros and cons of either renting or buying a home I settled on renting an apartment considering the following: the condition of the apartment, arrangement and space; there should be privacy and enough space in the bathroom and the bedroom. The living and dining areas should be proper for the resting and entertainment for the family. Storage space should be well placed and adequate in each area of the house. Wall areas, shapes and the room sizes should give room for furnishings and equipments planned or on hand. The exterior and interior finishes of the apartment should be easy to maintain, in good condition and acceptable. Then look into lighting and heating should have efficient and adequate systems and there should be some space outdoors where one can relax with friends and family either a deck, lawn or patio.
Work cited
Campbell, J. and J. Cocco. Household Risk Management and Optimal Mortgage Choice. Quarterly Journal of Economics, 2003, 118(4), 1449.1494.
Davis, M. and J. Heathcote. The price and quantity of residential land in the United States. Journal of Monetary Economics, 2007, 54(8), 2595.2620.
Muellbauer, J. and A. Murphy. Housing markets and the economy: the assessment. Oxford Review of Economic Policy, 2008, 24(1), 1.
Peart, Virginia. A House for Your Family: Buy or Rent? Salt Lake Cooperative Extension Service. Gainesville, FL. Fannie Mae. 2011. A Guide to Homeownership. Washington, DC.
Shelby, W.W. and Eleanor,J. Walls. Finding the Right House. Arkansas Cooperative Extension Service, University of Arkansas. Little Rock, AR, 2001, 13-22.
