Source: Deseret News —
The U.S. housing market is in the midst of a painful contraction after 2022 brought a volatile end to about two boiling hot years.
It’s tough news — especially for homebuilders — as demand dries up and prices flatline or even begin to drop. It’s also still tough for homebuyers. Home prices remain comparatively higher than they were even just three years ago amid today’s higher interest rates as the Federal Reserve continues to wage its war against record inflation levels.
If today’s market is brutal for homebuilders, it’s an even more challenging environment for affordable housing builders that are already trying to push the envelope when it comes to keeping costs low for renters while also ensuring projects are financially feasible.
‘Perfect storm’
It’s been a “perfect storm,” said Greg Gossard, president of The Hampstead Companies, a San Diego-based affordable housing developer that has also completed four projects in Utah.
“Then things got really out of control,” in 2022, when mortgage interest rates started shooting up, Gossard said. “Rates kept moving. Construction costs, as everyone knows, continued to inflate, so we were in this perfect storm of lower debt proceeds and higher costs.”
“We’re definitely being a lot more conservative in what we chase because of what we saw in 2022,” he said.
Jeff Nielson, president and CEO of Wasatch Residential Group, a Salt Lake City-based developer that focuses on affordable and market rate housing, said his company faced similar challenges as the market turned.
“We closed on zero tax credit deals in the state of Utah in 2022, which would definitely be a first for us in the last 10 to 12 years,” Nielson said.
Gossard’s and Nielson’s comments came during a virtual panel last week hosted by the Utah Housing Coalition to discuss the state of Utah’s affordable housing market.
As of early 2022, Utah faced a nearly 41,000-unit shortage of affordable and available units for extremely low-income Utahns, according to the National Low Income Housing Coalition. Utah’s affordability issues have also sharpened as the state continues to face a stubborn housing shortage that impacts market-rate prices.
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