Last month, we said it’s finally starting to feel like summer, and if we weren’t 100% certain, facing a week straight of 90+ degree weather now has us convinced. In this month’s update, we will discuss the the state of the U.S. economy, highlight the impact of record rent growth, get into the specifics of what modern tenant’s look for when selecting housing, and update you on Utah’s resilient real estate market. But first, the headlines…
May Jobs Report - In May, the U.S. labor market shrugged off persistent inflation and tighter monetary policy by adding 390,000 new jobs against expectations of only 318,000. Additionally, the unemployment rate remained steady at 3.6%. Make no mistake, monthly job growth has been trending downwards for several months, but economists aren’t worried considering employment is within 1% of our pre-pandemic levels. Despite solid gains in wage growth, high inflation continues to erode household buying power and all eyes will be on what response we see from the Fed during their next meeting.
Weekly Jobless Claims - For the week ending June 4th, weekly jobless claims came in at 229,000, hitting a 5-month high. The spike represents an increase of roughly 27,000 claims from the previous week, and while something to keep an eye on, is not necessarily a harbinger of things to come. For perspective, weekly claims averaged approximately 218,000 per week, throughout 2019, before the pandemic threw the labor market into chaos. Continuing claims held steady at 1.306 million while new local filings for Utah actually fell by 132 to 1,159 for the week.
Inflations Soars - Last month, we received good news on the inflation front as consumer prices climbed at a reasonable 0.3% pace. Today’s report did not continue that positive trend. The Bureau of Labor Statistics reported that consumer prices in May climbed at the fastest pace since 1981. Month over month, inflation is up 1.0% and climbed to an annualized 8.6% from the 8.3% recorded in April. The largest increases were seen in housing, gas, and food which should ring true to anyone whose traveled, eaten or shopped for a home lately. The grim news sent markets tumbling and is likely to encourage the Fed to continue aggressively hiking interest rates through the end of the year.
What Do Tenants Look For In A Rental?
There isn’t a landlord alive who doesn’t want a “good” tenant. Someone who pays their rent on time, maintains the yard, quickly reports problems, and perhaps most of all, doesn’t damage the home. These individuals are in high demand for obvious reasons, but how can that same landlord make their rental more desirable to their ideal tenant? The answer lies in the findings from the 2022 Renter Preferences Survey Report from the National Multifamily Housing Council.
The report, which is based on survey results that were sent to over 1 million residents between September and October of 2021, outlines modern renter preferences in a post-pandemic world. Over 221,000 responses were collected, and among the many interesting takeaways, is the fact that renters have been seeking more space in their living arrangements. Over the past 18 months, the primary catalyst for moving seems to be the shift to remote work, and respondents indicated that isn’t likely to change anytime soon.The report is full of interesting insights and we have listed some of our favorites below:
- ~60% of renters moved in the past 18 months, with roughly 25% of them moving as a result of shifting to remote work.
- Nearly 2 in 3 renters (64%) expected to be working remotely about the same amount as last year.
Preferred Housing Type
- Apartment - 57%
- Townhouse - 23%
- Single Family - 19%
Must Have Amenities (with monthly cost premium they are willing to pay)
- Washer/Dryer in unit - 92% ($54.73)
- Air Conditioning - 91% ($54.73)
- Sound Proof Walls - 90% ($46.21)
- High Speed Internet - 89% ($47.93)
- Walk-In Closet - 88% ($43.46)
Smart Home Technology (interested in or won’t rent without)
- Smart Thermostats - 70%
- Leak Detection - 68%
- Water-Saving Features - 67%
- Smart Security/Alarm - 66%
- Smart Lighting - 62%
- Smart Locks - 60%
- 70% of renters with pets indicated their pet was a dog
With modern renters planning on spending increased time at home as remote work becomes more commonplace, they are placing a greater emphasis on comfort and convenience. To the landlord who wants to maintain a desirable rental in a changing marketplace, this means investing in amenities and smart home technology for their rentals.
Utah Real Estate Market
The median sold price of a single family home in three Utah counties hit a new record high in May at $629,260, a 2.7% jump month over month. While a housing crash remains unlikely, few experts aren’t predicting a slowdown from the blistering increases we’ve seen over the last year. In fact, we are already seeing national headlines reflecting this sentiment (Home Sales Fall in April - CNN, The Market is Shifting - Marketwatch) and the pace of Utah’s year over year price increase is also slowing. Additionally, while the total number of closed transactions climbed slightly, the overall sales volume is down from this time last year and the average number of active listings is climbing. Ultimately, a cool down is a good thing because the recent pace of price growth is unsustainable and a return to a more balanced housing market is expected in the wake of the Fed’s decision to hike interest rates to combat inflation.
Median Sold Price*
Monthly Change: Up 2.7%
Monthly Change: Up 2.7%
Year Over Year: Down 16.5%
Average # of Active Listings*
Monthly Change: Up 42.8%
Year Over Year: Up 73.3%
* all graphs/data are for single-family homes in Salt Lake, Utah, and Davis Counties.
White House Announces Housing Plan - On May 16th, the White House released the Biden-Harris Administration Housing Supply Action Plan. The plan, which aims to reduce housing costs over time by adding supply, focuses on making local zoning changes and expanding financing options for affordable housing. The highlights include reducing regulatory barriers for development via grant programs totaling nearly $18 billion, allocating $25 billion in grants directed at affordable single and multi-family development, as well as actions to improve existing financing opportunities and exploring ways to minimize supply chain disruptions. These measures are supported by the NAA, and we agree that taking steps to address housing affordability is a massive need.
Single Family Anual Rent Growth Hits Record High - According to industry data giant Corelogic, annual rent growth in March tripled the gains from March of 2021. The gains, spread across four tiers of rental prices, were as follows:
- Lower-priced (75% or less than the regional median): 12.4%, up from 3.3% in March 2021
- Lower-middle priced (75% to 100% of the regional median): 14.1%, up from 3.5% in March 2021
- Higher-middle priced (100% to 125% of the regional median): 14.6%, up from 3.8% in March 2021
- Higher-priced (125% or more than the regional median): 13%, up from 5.3% in March 2021
While increases like these are expected to scale back toward historical levels, current landlords are reaping the rewards of sky high home values and climbing rents.