UNAFFORDABLE UTAH

Utah ranked No. 5 worst state to find a starter home

Apr 12, 2024, 2:41 PM

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Utahns have purchased at least 45 homes during the first week of the state first-time homebuyer assistance program. (KSL TV)

(KSL TV)

SALT LAKE CITY — In a recent study, Utah was ranked the fifth worst state to find a starter home.

Using data from Zillow, Redfin, Freddie Mac and the U.S. Census Bureau Construction Coverage studied the different factors impacting the amount of starter-size homes.

Construction Coverage calculated a score for each state based on the following criteria: the percentage of homes with three or fewer bedrooms, the monthly starter-size home mortgage payment as a percentage of median renter income, median sale price of homes with three of fewer bedrooms, supply of homes, and the homeownership rate for under-35 householders.

Notably, the study found geographical differences in the housing market with data showing that starter-size homes in western states were significantly less affordable than average.

The study showed the following charts.

 

Supply is also a large constraining factor for first-time homebuyers according to the study. Statistics show fewer small homes with 1-2 bedrooms are being built and more larger homes are being constructed.

“One- or two-bedroom homes represented 24% of single-family homes built in the mid-1980s, but just 5% in 2022. Over the same span, the share of new homes with four or more bedrooms grew from 19% to 53%,” the study stated.

The trend of less starter-homes being built is particularly prominent in the Great Plains and Mountain West regions. The study suggested this may be because these regions are less densely populated than their Northeast or West Coast counterparts. While the national average of starter-size homes is 67.7%, Utah has the lowest proportion of homes with three or fewer bedrooms at 41.8%. The states with the highest proportion of homes with three or fewer bedrooms were Rhode Island with 78.7% and West Virginia with 76.5%.

As far as affordability, the study found that a monthly mortgage payment for a typical starter-size home costs 39.8% of the median income for renters nationally. Geographically, the Mountain West, Pacific Coast, and Hawaii have each exhibited competitive real estate markets and above-average costs.

Based on the data, Hawaii is the least affordable state for first-time homebuyers with monthly mortgage payments requiring 75.5% of the median income for renters. California is the second least affordable state for first-time homebuyers at 67.1%.

Whereas states like Kansas (26.5%), Oklahoma (28.4%), and Iowa (30.1%) required a significantly smaller portion of income for monthly mortgage payments.

Housing has been a hot topic in the Beehive State as prices increase and demand outweighs supply. Governor Spencer Cox recently announced a $155 million plan to build more starter homes with a goal of 33,000 new starter homes in Utah by 2028.

Gov. Cox reveals 2025 budget plan with focus on starter homes

According to another recent study by Zillow, Utah has six “million-dollar cities,” where typical home prices are at least $1 million. Those cities include Granite, Alpine, Park City, Alta, West Mountain (in Utah County,) and Kamas.

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Utah ranked No. 5 worst state to find a starter home