Home market prices are falling in Salt Lake County, Utah

A once-simmering housing market that was shocked by higher mortgage rates is taking its toll on Utah’s housing market.

Utah’s most populous county, Salt Lake County, saw its first annual decline in home prices since 2011. In December, the median single-family home price in Salt Lake County fell to $541,900 – 6% below the county’s December 2021 median price.

That’s according to new UtahRealEstate.com data released Tuesday by the Salt Lake Board of Realtors.

Is the housing market crashing?

While it’s significant that Salt Lake County saw its home prices decline for the first time in more than a decade, it’s also important to note that these year-over-year declines come after about two years of wild price spikes fueled by The pandemic is home to a market frenzy that has hit the West and states like Utah and Idaho particularly hard.

That rush has caused the median single-family home price in Salt Lake County to jump nearly 60% from 2020 to 2022. Last May, the county’s median single-family home price was $650,000. Since then, house prices have fallen by 17%.

Utah housing experts and economists do expect 2023 to bring a painful housing hangover after two years of unprecedented price increases and a wave of demand — but they also aren’t predicting a 2008-like crash.

Today, the U.S. housing market is going through what Federal Reserve Chairman Jerome Powell called a “difficult correction” and “reset” as it emerges from the end of a pandemic-fueled “housing bubble.”

Experts say Utah’s strong economy and labor market will protect the state from the widespread job losses and foreclosures seen since the 2006 housing bubble burst, largely fueled by risky lending practices and the subprime mortgage crisis.

However, Utah housing experts are also divided on how far Utah home prices will fall in 2023 before possibly rebounding in 2024.

Jim Wood, Ivory-Boyer Senior Fellow at the Cam S. Gardner Institute of Policy at the University of Utah, has a more optimistic forecast, expecting Utah to see modest “year-over-year price declines in the first and second quarters of 2023, but prices will start to stabilize by the third and fourth quarters,” he told real estate professionals at the Salt Lake Council of Realtors’ 2023 Housing Outlook earlier this month.

However, Wood’s colleague at the Kem S. Gardner Institute, Dejan Eskich, is more bearish, predicting that Utah home prices will fall 9% year over year in 2023. From peak to trough, he expects prices to fall by a percentage somewhere in the mid- to low-teens, depending on interest rates.

Wood and Eskick predict that Utah’s expected housing shortage of 31,000 units will continue to keep home prices high even if the state sees some price declines, so they expect Utah’s housing affordability crisis to remain an ongoing problem. which prices more than 75% of Utahns out of affording a home at the state median price.

Meanwhile, sales in Utah fell by a hair’s breadth.

Sales of all home types fell to 761 units in Salt Lake County, down 50 percent from 1,508 sales in December 2021, according to the Salt Lake Board of Realtors. For all of 2022, Salt Lake County annual sales totaled 13,087, down 26% from 2021.

This is the “steepest one-year decline on record (1997 to date),” according to the board. “Prior to 2022, real estate sales were remarkably consistent for seven years at around 18,000 sales, diverging only in 2020, the year of the pandemic, when sales jumped to 19,000 units.”

What does this mean for home buyers?

Although home prices remain high compared to just three years ago, slowing sales and lower home prices could help give homebuyers a bit more of an edge over the frenzied market in 2020 and 2021.

“Homebuyers have more negotiating power,” said Rob Okey, president of the Salt Lake Board of Realtors, in a prepared statement. “The good news for sellers is that despite recent price declines, the majority of homeowners have plenty of equity. A large number of homeowners do not have to sell. They can stand back and wait for the dust to settle.

Oki also said price declines are expected to stabilize by the third quarter of 2023.

Meanwhile, given Utah’s housing shortage, demand for Utah housing is expected to remain relatively strong.

“Demand for housing is strong due to net inward migration and population growth,” Oki said. “More than one-third (38%) of all active listings on UtahRealEstate.com are in contract, indicating that there is still strong buyer demand in our market.”

Mortgage rates in 2023

Mortgage rates are also beginning to soften after crossing the 7% threshold for a period last year.

Mortgage rates fell last week to 6.15%, the lowest level since September 2022, according to Freddie Mac.

Rates are expected to fall to 5.5 percent this spring, according to Lawrence Yoon, chief economist for the National Association of Realtors.

“The spread between the 10-year Treasury and the 30-year mortgage rate is extremely wide,” Yoon said during the Salt Lake Board of Realtors forecast earlier this month while visiting Salt Lake City. “If we had a narrowing, or let’s say a normal spread condition, today’s mortgage rate would be 5.5%.”

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