Housing market: Utah just saw the most price cuts in the US

With the US housing market showing major signs of cooling – from layoffs at mortgage lenders to several consecutive months of declining sales – it is hitting Utah on a massive scale.

The reels start to spin. Motivated sellers are beginning to temper their expectations that buyers will pay just about anything to lock up a home.

Nearly half of all home sellers in Provo — Utah County’s largest city, about 75 miles south of Salt Lake City — cut their asking prices in May as mortgage rates rose well above 5%. Higher loan rates, coupled with historically high home prices, have left more than 70% of Utah households unable to afford the price of a state average home.

That’s according to data posted this week by Redfin, noting that Utah’s regional Provo market saw the highest share of price drops in May of the 108 subways included in the analysis.

It is important to note that monthly price declines do not equate to a price crash or an actual decline in the home price trajectory in Utah, which has been on the rise since the US housing market recovered in 2006 and bottomed out in 2009. It would likely take an economic turnaround—major layoffs, forced evictions, and a bleak job market—to dramatically disrupt the Utah home price trajectory and push prices down statewide.

And price cuts aren’t uncommon — in fact, it’s common for sellers, especially motivated sellers, to lower their listing price if they discover that their initial listing price may have been too high to compete with other offerings.

However, if a regional market sees significant price cuts, “it usually means things are starting to cool down,” as Fortune put it. “That’s exactly what we’re seeing now.”

Homes on Provo’s eastern bank are pictured on Thursday, June 23, 2022. In May, 47.8% of Provo sellers reduced their list price. That is more than 12.2% in May 2021.

Jeffrey D. Allred, Deseret News

What’s Happening in Utah’s Housing Market

About According to Redfin, prices fell in 47% of houses in Provo in May. That’s the highest share of austerity that regional markets across the country saw in May. Compare that to a year ago, in May 2021, when only 12% of Provo’s offerings saw price cuts.

And two other regional markets in Utah — Salt Lake City and Ogden — were among the top five metropolitan areas with the largest increase in the share of offers with price drops compared to a year earlier.

  • In Salt Lake City, 45.8% of homes for sale saw price cuts in May. Ogden was not far behind, with 42.6% of homes falling in price. That same figure was just 20% in Salt Lake City and Ogden in May 2021, according to Redfin.

Here’s how these Utah markets compare to other top 10 regional markets that saw the most price cuts in May, according to Redfin:

  1. Provo, Utah – 47.8% of homes for sale saw prices fall in May.
  2. Tacoma, Washington — 47.7%.
  3. Denver, Colorado — 46.9%.
  4. Salt Lake City — 45.8%.
  5. Sacramento, California — 44.3%.
  6. Boise, Idaho — 44.3%.
  7. Ogden, Utah — 42.6%.
  8. Portland, OR – 42%.
  9. Indianapolis, Indiana — 41.9%.
  10. Philadelphia, Pennsylvania — 41.2%.

Why do sellers lower prices?

The increase in price falls is a great indicator that the housing market is turning – and buyers have found their limit.

“The uptick in price falls is symbolic of the slowdown in the housing market. Many buyers are retreating amid skyrocketing house prices, rising mortgage rates, high inflation and a faltering stock market,” Redfin reported.

In other words, sellers recalibrate their prices to better align with buyers’ needs. Redfin chief economist Daryl Fairweather said as more sellers “come to terms with the slowing market,” the proportion of homes with price cuts will also decline.

“There are two types of salespeople in today’s market: those who already know that the market has cooled, and those who are learning about the refrigeration market as they go through the sales process,” Fairweather said.

“The former wants to sell quickly before the market slows further and they are willing to price anything below comparable homes in their area right away, and the latter may need to lower their price if their home doesn’t attract buyers within a few weeks.”

Why are quote prices falling in Utah, Idaho?

The pandemic had an inordinate impact on the housing market in the West, especially in mid-sized states like Utah, where the cost of living and housing was significantly more affordable than places like California, but also where opportunities for outdoor recreation abound.

“The regional housing markets that have experienced the most price cuts are in the places that have risen the most during the pandemic,” Fortune reported, pointing to Provo. “The market, just a short drive from several ski slopes, saw a huge influx of remote workers during the pandemic.”

The burgeoning state of Utah was already dealing with a housing shortage before the COVID-19 pandemic hit, putting it and other states in the West, such as Idaho, on the national map as attractive destinations for Americans liberated by remote work. Demand skyrocketed even more, translating into double-digit annual price increases that have led to price increases of more than 50% or even 60% in some areas.

According to Redfin, three of Utah’s regional housing markets and one of Idaho’s — Provo, Salt Lake City, Ogden and Boise — were among the top 10 places where home prices rose the most during the pandemic.

From May 2020 to May 2022, home prices rose a whopping 65.7% in Provo to a median price of $550,000, Redfin reported. They were up 56.2%, to $556,000, in Salt Lake City, 57.2%, to $500,000, in Ogden, and 66.7%, to $550,000, in Boise.

“The rising prices were largely due to out-of-town home buyers moving in during the pandemic and competing with locals for a limited supply of homes,” Redfin reported, noting that migration to both Boise as Utah “nearly tripled over the course of 2020.”

But May’s drop in prices — and an increase in more people looking to leave the Salt Lake area, according to Redfin’s data — could be a clue that the pandemic-driven hype about Utah and Idaho may be drying up.

“The trend has begun to reverse in both places, with Salt Lake City seeing net outflows for the first time in Q1 (more Redfin.com users wanting to leave than coming in),” Redfin reported.

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