The housing market ‘stabilises’ in this state. This is what that means

For the first time in about two years, Utah has seen a small decline in the median home price.

In June, it fell to $530,000, down from $535,050 in May.

Meanwhile, sales are falling dramatically. From April to June, single-family homes in Wasatch Front counties fell 10%, to 7,140 single-family homes sold from 7,921 a year earlier. In Salt Lake County, single-family home sales fell 15% from the second quarter of 2021, to 2,800 homes sold from April to June this year.

But don’t get too excited — or jump to conclusions that Utah is about to see a housing bubble burst and prices are about to hit free fall.

This means house prices in Utah are beginning to “stabilise,” as the Salt Lake Chamber put it. It’s actually welcome news in a housing market that plagues homebuyers, said Dejan Eskic, a senior research fellow at the University of Utah’s Kem C. Gardner Institute and one of Utah’s leading housing experts. He is also the chief economist for the Salt Lake Board of Realtors.

“After two years of a frenzied market with multiple offers tens of thousands of dollars above the asking price, the Utah real estate market is approaching normalcy,” Eskic said.

While homebuyers have struggled to navigate an unforgiving market for the past two years, often with just days to submit a winning bid before a home would be snatched, the market is finally calming down.

“Instead of a house taking a few days to sell, it will probably take a few weeks,” Eskic said.

It’s something Eskic feels personally. He recalls the sense of urgency he felt when he bought his house at the height of the frenzy, joking that he probably “spent more time deciding which running shoes to buy” than considering whether to make an offer. his house would do.

So what does all this mean for the Utah housing market, and where do we go from here?

Yes, house prices are starting to stabilize. But they are stabilizing at record highs, and for various reasons Eskic will collapse below for us, they are expected to remain high.

Utah house prices stabilize, but stabilize high

That’s not good news for Utahns and Utah’s affordability crisis. Yes, higher mortgage rates of 5% to 6% have dampened demand somewhat these days, but they’ve also priced as much as 70% to 75% of Utahns, according to Eskic’s calculations. That has pushed typical monthly mortgage payments from $1,400 a month earlier this year, when interest rates were lower, to $2,600 now.

Again, context is key. Yes, Utah’s median home price has fallen slightly, but it’s still well above the half-million dollar mark. Compare that to January 2019, when it was just under $300,000, according to UtahRealEstate.com.

“So our prices are still in the stratosphere,” Eskic said. He noted, however, that the state’s year-over-year price increases have fallen from more than 20% to the mid-teens.

That’s what Eskic predicted would happen — higher mortgage rates would certainly dampen what has been a catwalk market for years, but as Utah’s economy remains strong, jobs abound and the state’s housing shortage remains a persistent problem, the demand remain strong thanks to the growth of the state.

Why Utah Is In Its Own ‘Bubble’ Compared To The Rest Of The Country

According to the Salt Lake Chamber’s economic dashboard, Utah’s 2% unemployment rate is the third lowest in the nation, along with New Hampshire and closely behind Minnesota and Nebraska. However, Utah consumer confidence reached its lowest level in June since data was collected in October 2020, comparable to national consumer confidence in a 70-year history.

That means Utah is seeing signs of “trailing growth as inflation and interest rate hikes weigh on consumers,” Derek Miller, president and CEO of the Salt Lake Chamber, said in a prepared statement.

However, Utah’s economy remains strong, Miller said, and despite these challenges, “Utah remains net positive for industry growth across all sectors.”

While Eskic said the “dirty R word is being thrown around” — recession — as the US grapples with inflation and other challenges, Utah has historically outperformed the rest of the nation thanks to its strong economic position.

“We’re not immune…but we’re also in a bit of a bubble,” Eskic said. “Our market has been growing organically for a while now, and so even with whatever happens in the economy, after the dust settles,[people]come here because they’re comfortable in Utah. They realize there’s a little less uncertainty is in Utah because… we are stable.”

Why are home prices so high in Utah?

Utah home prices were already rising steadily before the COVID-19 pandemic hit. It just accelerated that to insane levels.

“We exploded well before the pandemic,” Eskic said. “It was just more fuel to the fire.”

Now we’re off that sugar high. National headlines have noted that Utah has recently seen some of the largest stocks of home sellers drop their prices — but that’s because sellers have finally found home buyers’ breaking points and are adjusting their listings to reality.

While the price increase is no longer in the 20% range, Eskic said the price growth lingering in the teens isn’t technically good. The market is still expensive even though the sentiment is changing and slowing down,” he said.

“We need to bring the price (increases) down to the single digits,” Eskic said. “We have to come back to that.”

But the good news, Eskic said, is that he sees a sense of “seasonality” returning to Utah’s housing market. Along with the impact of high mortgage rates, he predicted that July’s numbers will slow the state’s market even further — reflecting a mid-summer seasonal slowdown we’d normally see before the pandemic hit the market. led to madness.

“Finally, in two years (since COVID-19), we have seasonality returning to the market,” he said.

Inventory is rising, but Utah’s housing shortage continues

Utah’s housing stock is also returning to pre-pandemic levels, Eskic said, “which I’m glad to see. It probably happened a little faster than I thought, frankly,” but the high mortgage rates had a dramatic effect.

Here’s some historical context to put Utah’s current home inventory into perspective: From 2016 through early 2020, before the pandemic hit, there were 2.3 homes on the market for every home sold. During the housing fever of COVID-19, 0.8 homes were listed for every home sold. Some months it even dropped to 0.5 houses on the list, Eskic said.

Now Utah’s home inventory is ticking again, but it’s still not back to pre-pandemic levels. In June, 1.7 homes were listed for every home sold. “Ideally, we should get back to the two,” Eskic said, predicting that could happen next month.

Still, even though the stock is rising dramatically compared to what it has been for the past two years, it still doesn’t solve what has been a problem in Utah for years. There are still not enough houses.

That’s even though housing exploded here in 2021, putting Utah on the national map due to the housing boom. It made quite a dent on Utah’s housing shortage, but not enough to erase it.

According to a recent report written by James Wood, an Ivory-Boyer senior fellow at the University of Utah’s Kem C. Gardner Policy Institute, Utah’s cumulative housing shortage now stands at 31,000, compared to about 56,000 in 2017, and is mandated by the Salt Lake Board of Realtors.

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