Call it our “new abnormal” for housing.
Home sales across the Wasatch Front — already on a downward slide due to escalating prices and a lack of inventory — have plunged to deeper lows due to rising interest rates, data released Thursday shows.
About 7,148 single-family houses changed hands from April through June across the five-county area centered on Salt Lake City — volume so low you have to go back to 2012, when the Beehive State started to climb out of the Great Recession, to find smaller quarterly sales numbers. It is down almost 10% from a year ago, led by Salt Lake County, which saw its sales dive by 15% year over year.
[Go to www.sltrib.com/homeprices to see home prices and sales in the five-county region by ZIP code.]
Sales of condominiums, typically more modestly priced, fared even worse, tumbling by 23% from this time last year.
If you are a prospective buyer, however, you might take some consolation: After months of slim pickings, active listings of homes for sale shot up across Salt Lake, Utah, Weber, Davis and Tooele counties in the second quarter, soaring by 175%. That has lifted inventory almost to pre-pandemic levels.
And, instead of the average home selling in a matter of days, now “it probably will take a few weeks,” said Dejan Eskic, chief economist for the Salt Lake Board of Realtors and a senior research fellow at the University of Utah’s Kem C. Gardner Policy Institute. “After two years of a frenzied market with multiple offers tens of thousands of dollars above asking price, Utah’s real estate market is approaching normalcy.”
Approaching, but not there yet — or, as Eskic put it, “a crazy normal.”
Prices shot up but might be slowing, too
Prices continued a rapid upward march last quarter, with Salt Lake County’s latest median price tag on a single-family home reaching a bewildering $625,000, up nearly 20% from a year ago, when it was at $525,000.
For perspective, that same median was $300,000 six years ago.
Every ZIP code in Salt Lake County saw home prices rise by between 14% and 35% more in April, May and June, except for 84103, which takes in Capitol Hill, the Avenues and Federal Heights. That area saw median prices nudge down slightly, to $865,000.
Overall, the county’s most expensive ZIP code was 84108, extending from Foothill Drive into Emigration Canyon, with a median sales price of $925,000 in the latest quarter, followed by 84020 in Draper ($880,200); 84092, covering the east side of Sandy ($880,000); and 84124, encompassing parts of Holladay and eastward toward Mount Olympus.
The least expensive neighborhoods were in West Valley City’s 84119, at a median of $438,750; 84006 in Copperton ($410,000); and 84104, which spans Salt Lake City’s Glendale neighborhood ($409,000).
It might take a few months or longer before the Federal Reserve’s inflation-targeted hikes in interest rates — which are now hovering north of 5% for a standard 30-year mortgage — start to slow the growth in those prices significantly.
Early signs of that have started to surface, though. Houses in Salt Lake County have sold at listing price or above — often dramatically above — for nearly 18 months. But sometime in June, that began to turn around, with the list-price-to-sale-price dipping below 100% for the first time since May 2020.
“Sellers are not getting their asking price,” said Dave Anderton, spokesperson for the Salt Lake Board of Realtors. “In 2020 and 2021, the asking price was where it started and people were getting $30,000, $50,000 or $100,000 over that.
“That’s gone away,” he said, “and multiple offers have gone away, too.”
That clearly has helped some buyers already.
‘We kind of got lucky’
Bill Hooper, a 64-year-old retired aerospace industry manager from Taylorsville, and his wife searched for a new home in the Salt Lake Valley for almost 18 months in hopes of “flat-sizing” to get around having to walk up and down stairs.
Their price range topped $1 million, but they still couldn’t find anything, looking in Millcreek, Cottonwood Heights, Sandy, Draper and Midvale. That is, until Tuesday, when the couple closed on a home on the same street where they have lived for almost 20 years, at well under the price they had budgeted.
“We didn’t end up in a battle for it,” a delighted Hooper said, adding that interest rates probably reduced some of the competition. “We kind of got lucky in that regard.”
Eskic predicted price escalation on homes in Utah will continue to ease as rates rise further but are unlikely to start dropping, given the state’s steadily growing population and sharp rebound in its job markets.
“I don’t want to say they’re crashing,” he said, “but they’re slowing dramatically.”
A national study indicates that Ogden in Weber County was among the first 12 U.S. cities in June to start seeing what researchers call price premiums on homes begin to decline, along with other Western cities such as Boise, Denver, Portland, Seattle, San Francisco and Los Angeles.
“Premium declines are an early warning sign that prices are leveling off and likely on the way back down,” said Ken Johnson, a real estate economist at Florida Atlantic University. “We will look back at this point as the starting gun for the downslope in our next housing cycle.”
Squeezing renters and slowing construction
This all affects Utah’s renters, too, in a big way. Buyers are being sidelined from for-sale markets because they can’t qualify for a loan or afford a prospective monthly mortgage that has jumped by $1,200 or more in a matter of months, forcing many of them to keep renting.
That, along with other pandemic-related factors such as in-migration and inflated building costs, puts upward pressure on rental demand and rents are spiking as a result, even as thousands of new apartments are being built in Salt Lake City and across Utah.
Zumper, the online apartment rental site, reported earlier this week that monthly rents on two-bedroom unit in Salt Lake City were up 17% from this time last year, at $1,590, with one-bedroom flats at $1,260 per month. That ranks Utah’s capital as the 55th most-expensive rental market in the nation, according to Zumper’s latest report.
These trends are also likely to have a mixed effect on new-home construction, experts said. A recent report showed Utah leads the nation in new for-sale homes and rentals as homebuilders scramble to catch up with an estimated housing shortage of between 30,000 and 45,000 units statewide.
But Eskic said some builders could start backing off as they see prospective buyers leave the market and demand softens even more. “So it’s a bit like Whac-A-Mole,” he said. “You benefit one group but then someone else gets hurt.”