At the moment, Utah’s first-time homebuyers assistance has a narrow fit in the market

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The state of Utah wants to make it easier for people to buy their first home, but the market isn’t making it easy. As of June 30, real estate aggregator Zillow pinned the typical Utah home’s value at $510,934 — which is down slightly from June of last year.

The Utah First-Time Homebuyers Assistance Program has $50 million that state lawmakers allocated earlier this year. Legislative estimates said the money could help 2,400 families purchase their first homes. After opening up to applications on July 11, nearly $1 million has been shelled out to 50 first-time buyers.

“I think we’re about where we expected to be and we’re excited for what’s happened so far in this first three weeks or so that the program’s been available,” said Jonathan Hanks, CEO of the Utah Housing Corporation, the administrator of the program.

Up to $20,000 in a 0% loan that will help cover the cost of a down payment is available per household — but there’s a catch. The purchase price is capped at $450,000 and the home must be new or never-occupied construction.

Creating new supply in the housing market, said Hanks, is one of the biggest goals of the program.

“There is a lot of interest from the builder community in adjusting their practices to make sure that they can hit this price point,” said Hanks. “People are staying in their homes and not selling and it’s creating more demand for new construction.”

Rising interest rates seen across the country since mid-2022 have put pressure on buyers and sellers across Utah. People who might have been in the selling mood are deciding to stay put instead.

Why would they put their home on the market if a couple of years ago they got an interest rate at 2.5% or 2.75% when today’s interest rates are between 6% and 7%? Almost double, triple what they were,” said realtor Babs De Lay with Urban Utah Homes and Estates.

That environment has increased demand for new construction, something both De Lay and Hanks have seen a lot of in 2023, so far.

“The timing of this program actually works really well,” said Hanks. “There’s an incentive to purchase new construction, and that’s mainly what’s available out there right now.”

There is a lot of new construction inventory out there, yeah,” added De Lay. “I also see a massive amount of high rise apartments being built. However, none of those apartments are being built for senior citizens. Very few are being built for low income.”

According to Hanks, it’s hard to give an exact number of units in the state that fall under the program’s parameters, mostly because there are many construction projects across Utah that are yet to be built.

Data from the Utah Housing Corporation says 60% of units identified as falling within the programs guidelines are townhomes or attached units. Almost half of the total number of units are within fast-growing Utah County.

“Anecdotally from just different conversations I’ve heard, it sounds like there’s maybe 4,000 units or potential units that are not built yet, but may be platted and ready to be built across the state that might fall within that $450,000 or below [threshold],” he said.

But for De Lay, the program is still too narrow to help the largest number of Utahns.

“It depends on where you’re going to live,” they said. “Maybe out in Grantsville, that [$450,000 limit] might be great. But the average price, for example, in Salt Lake County is $600,000. Park City is over $1,000,000. Washington County is quite high as well.”

In order for the program to succeed, De Lay said it needs to reflect the diverse housing landscape.

“[The law should] be amended to take into consideration what the middle price range is in that particular county, because Davis County is a lot different than Salt Lake County, which is a lot different than Summit County, Washington County, Iron County, et cetera,” they said. I tend to be an optimist, and I think this is the first year that this program is going to be in effect and people will learn from that. So I hope that they will expand that program to not just new construction, but also a higher price range in different counties.”

According to the law, the Utah Housing Corporation has the power to adjust the price cap once per year to better reflect market conditions. Further changes could be on the horizon, too. Those could include things like different price caps for townhomes and single-family units as well as different caps based on the conditions in local housing markets.

With more time, Hanks said the program will also have a better sense of the demographics of who is applying for assistance. Where people are looking to move, household size and income level are all important metrics to consider.

I think within a year we’ll have a much better idea of adjustments,” he said. “But as far as further adjustments, we’ll need a little time under our belt.”

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