Utah may see a wave of wealthy people buying million-dollar homes. And it could drive up prices for everyone.
Wealthy out-of-staters drawn by Utah’s many charms have lifted sales of million-dollar homes along the Wasatch Front in recent years.
Now, thanks to the latest federal tax reform, some economists are predicting that steady flow of rich homebuyers could turn into a flood, potentially pushing already-high housing prices even higher.
Be they ivy-clad mansions in Salt Lake City’s Federal Heights or Harvard-Yale districts; upscale new dwellings in the Avenues, Sandy, Draper, Alpine or Provo; or exclusive winter retreats in Park City, sales of homes priced at or above $1 million have surged.
Across Salt Lake, Utah, Davis, Weber and Tooele counties, 257 homes in that price range sold in 2017, according to the Salt Lake Board of Realtors. That’s a 59 percent rise over sales the year before and a whopping 101 percent leap over similar transactions in 2014.
Through May of this year, buyers have snapped up 110 homes in the five-county area, all priced at $1 million or more.
“A roaring economy and wealthy transplants are fueling million-dollar home sales,” said Adam Kirkham, the board’s president and associate broker with Summit Sotheby’s International Realty, with ties to the British luxury auction house of the same name.
In wealthier Summit County, the median home prices in Park City, Park Meadows, Old Town and in the Snyderville Basin are all well above the million-dollar mark — and sales are, in most cases, ahead of last year’s numbers.
“Everything is going up,” said Todd Anderson, president of the Park City Board of Realtors.
‘A good thing’
Utah’s population is projected to exceed 5 million by 2050, much of that driven by its higher-than-average birthrate. But net migration of new residents to Utah has come roaring back from a two-year period of net exodus during the Great Recession. It’s now projected that Utah will add 30,000 transplants in 2018, according to the latest report from Utah Gov. Gary Herbert’s Economic Council.
That’s expected to climb to between 35,000 and 41,000 people per year through 2065, that report said.
How many of those new residents will be wealthy people buying homes and what their impact may be on the market are hard to ascertain, for complex reasons.
“It’s not just millionaires moving to Utah, obviously,” said Dave Anderton, spokesman for the Salt Lake Board of Realtors. “It’s everyone coming in.”
But, anecdotally, area real estate experts say well-heeled out-of-state homebuyers — lured by Utah’s economy, recreation, scenery and quality of life — are already a notable force in home markets.
“As somebody who has a well-rounded mix of price points that I work on, there has been an increase at that level,” said Cheryl Acker, an associate broker and owner at Utah Key Real Estate in South Jordan.
“And to me,” she said, “that’s a good thing.”
Now, a series of new limits on federal tax breaks have the potential of bringing in even more big-ticket buyers — some say thousands more.
For some, a new tax bite
Signed by President Donald Trump in December, the tax overhaul capped federal deductions for state and local income and sales taxes at $10,000 per family. According to prominent U.S. economists Arthur Laffer and Stephen Moore, that change alone could dramatically boost the tax bills of wealthy residents living in high-tax states.
While 90 percent of U.S. taxpayers won’t be affected by the deduction change, Laffer and Moore wrote in April, big earners in states with relatively high income taxes could see their federal taxes soar, leading some to consider pulling up stakes and moving.
In a column for The Wall Street Journal headlined “So Long California. Sayonara, New York,” Laffer and Moore estimate “that both California and New York will lose on net about 800,000 residents over the next three years — roughly twice the number that left from 2014-16.”
Connecticut, New Jersey and Minnesota combined will lose another 500,000 in the same time frame, they estimate.
“The winners are likely to be states like Arizona, Nevada, Tennessee, Texas and Utah,” Laffer and Stephens wrote. ”Red states ought to brace themselves: The Yankees are coming, and they are bringing their money with them.”
Through a spokesman, Sen. Orrin Hatch, R-Utah, a key architect of the tax plan in his role as chairman of the Senate Finance Committee, noted that the Beehive State was one of the top states for attracting businesses well before the tax reform became law.
“While we expected people to continue to migrate to Utah for any number of reasons, we also expect the positive impact of tax reform to make life easier for Utahns for years to come,” said Matt Whitlock, Hatch’s deputy chief of staff.
While the precise political and social effects of this potential migration are unclear, Laffer and other economists predict real estate values in low-tax states where these folks resettle will climb.
To some in Utah, that’s a daunting prospect. Recently published research indicates that Utah home prices have already grown faster than almost anywhere in the nation in the past 25 years.
Salt Lake County’s median single-family home price hit $340,000 as of early May, the highest ever recorded. Adjusted for inflation, that is 11 percent higher than the peak in Utah home prices in summer 2007, just before U.S. housing markets crashed.
“Higher home prices are becoming a hurdle for many first-time homebuyers,” said Kirkham, with Summit Sotheby’s International.
Few are talking about another housing bubble just yet, but many worry rising prices could start to hamper Utah’s record-setting economic growth as incoming workers find it increasingly difficult to afford homes.
For the first time in nearly 40 years, the number of Utah households has outstripped available homes. Supplies of the three major types of housing in Utah — existing homes, rentals and new construction — are all currently “strained,” according to a recent campaign launched by the Salt Lake Chamber.
That squeeze led both single-family home and rental prices to go up by 6 percent last year alone, its analysis showed.
Why we move
Hold on, say some leading Utah experts on the economics of migration. Large projections for how many people might exit high-tax states for Utah and other locales may be overblown.
Taxes, they argue, are just one factor in a constellation of reasons why Americans move, whether across the state or across the country.
“They don’t just go for income,” said Pam Perlich, director of demographic research at the University of Utah’s Kem C. Gardner Policy Institute. “They consider lifestyle, family ties, quality of life, schools for people with kids, safety, crime rates — even the weather.”
In fact, Perlich said, polls show that tax rates fall well behind considerations like cost of living, health care and climate as people weigh whether to move. And for many, employment itself is the main driver.
“They are moving for jobs,” said James Wood, Perlich’s colleague, senior fellow and economist at the Gardner Policy Institute. “That’s the reason they come, and that’s the reason we’re doing well, because we’re creating a lot of jobs.”
Utah will probably see increases in those moving to the state — particularly retirees — due to the latest changes in U.S. tax law, Perlich said, “but it won’t be like the floodgates opening.”
“There will be some more people that come to Utah,” she said, “but those would have been people who were probably getting ready to move anyway.”
California native and well-known restaurateur Aaron Ferer fits that description in many ways.
Ferer, 75, came to Utah in the 1990s and built a home in Deer Valley’s Bald Eagle development that later sold for more than $6 million, a record of sorts at the time. He has since partnered with retired Utah Jazz player Mark Eaton and others to create the high-end Italian eatery Tuscany in Holladay, one of seven restaurants in Utah and California that Ferer has opened.
With a financial foot in both states, Ferer says taxes are indeed driving businesses and residents at higher income levels out of California. He estimates his costs would be 30 percent to 35 percent higher if he lived on the coast full time.
“People cannot afford to live there anymore,” he said one recent morning, standing outside his current Utah residence in Federal Heights. “You’ve got wealthier people saying, ‘Enough is enough!’ “
What’s more, Ferer said, a million dollars buys far more home in Utah than it does in California’s San Francisco Bay Area.
Their five children grown, Ferer and his wife, Sandra, hope to downsize and now have their fully modernized, 3,299-square-foot, federalist-style home on Arlington Drive on the market — asking price: $1.1 million.
In the three weeks or so it’s been listed, Ferer said, “we’ve had a lot of showings” but no buyers yet. “That’s OK,” he said. “People are liking it. We’re not in a hurry.”