Sales are down, inventory is increasing, and price increases are halting. So why are so many Utahns still priced out of the real estate market? Utah’s median house price has fallen for the first time in almost two years. In June, it fell to $530,000, down marginally from $535,050 in May.
Meanwhile, sales are significantly slowing. From April through June, single-family home sales in Wasatch Front counties fell 10%, to 7,140 units sold, down from 7,921 units sold a year earlier. Single-family home sales in Salt Lake County declined 15% from the second quarter of 2021 to 2,800 units sold from April to June this year.
But don’t get too enthusiastic or leap to ominous conclusions, like the idea that Utah’s housing bubble will explode, and prices will plummet.
The slowdown indicates that, as the Salt Lake Chamber phrased it, Utah’s property values are starting to “stabilize.” According to Dejan Eskic, a senior research fellow at the University of Utah’s Kem C. Gardner Institute and one of Utah’s top housing specialists, the news is welcome in a housing market that has been punishing homebuyers. He is also the Salt Lake Board of Realtors’ top economist.
“After two years of a frenetic market with many bids tens of thousands of dollars over asking price,” Eskic said, “Utah’s real estate market is reaching normality.”
While homebuyers have battled over the previous two years to negotiate a tough market, with frequently just days to make a winning offer before a property was picked up, the market is gradually calming down.
“Instead of a couple of days, it’ll probably take a few weeks,” Eskic said.
It’s something Eskic personally feels. He recalls the feeling of urgency he had when he purchased his house during the frenzy, joking that he probably “spent more time selecting what running shoes to buy” than determining whether to make an offer on his property.
So, what does this imply for Utah’s real estate market, and where do we go from here?
Yes, property prices are starting to level out. However, they are stabilizing at record highs, and for various reasons that Eskic will explain below, they are projected to remain high.
Utah housing prices are stabilizing – but at a higher level.
That’s bad news for Utahns and the state’s housing affordability issue. Yes, higher mortgage rates of 5% to 6% these days have curbed demand slightly, but they’ve also priced out a startling 70% to 75% of Utahns, according to Eskic’s estimates. The usual monthly mortgage payment has risen from $1,400 earlier this year, when interest rates were lower, to $2,600 today.
Again, context is crucial. Utah’s median house price has fallen marginally, but it is still over $500,000. In January of 2019, it was a little under $300,000, according to UtahRealEstate.com.
“So, our pricing is still out of this world,” Eskic said. However, he highlighted that the state’s year-over-year price hikes had dropped from more than 20% to the mid-teens.
Higher mortgage rates would undoubtedly cool what has been a runway market for years, but since Utah’s economy is robust, jobs abound, and the state’s housing scarcity remains a chronic issue, demand will stay strong because of the state’s expansion.
Why is Utah isolated from the rest of the country?
According to the Salt Lake Chamber’s economic dashboard, Utah has the third lowest unemployment rate in the US, tied with New Hampshire and after Minnesota and Nebraska. Utah’s consumer confidence, on the other hand, fell in June to its lowest level since data collection started in October of 2020, aligning with national consumer confidence levels in a 70-year history.
That means Utah is “tapering growth as inflation and interest rate rises weigh on consumers,” according to Derek Miller, president and CEO of the Salt Lake Chamber.
Despite these problems, according to Miller, Utah’s economy is robust, and “Utah remains a net positive for industrial growth across sectors.”
Even though the “dirty ‘R’-word” –a recession is being bandied about as the United States grapples with inflation and other issues, Utah has typically fared better than the rest of the country because of its solid economic status.
“We’re not immune… but we’re also in a tiny bubble,” Eskic said. “Our market has developed organically for a long now, and so regardless of what happens in the economy, (people) come here because they feel safe in Utah. They see less uncertainty in Utah because… we are steady.”