It’s just two weeks into 2023, and Utah real estate agents are already being told to look to 2024 for things to improve.
Hundreds of them broke into a slow nervous laugh Friday when one of the state’s top housing economists offered them advice after delivering a series of forecasts of more interest rate hikes, falling home sales and other bleak markers this year.
“Just hang in there,” Jim Wood of the University of Utah’s Kem C. Gardner Policy Institute told them as they gathered for an annual look into their crystal ball. “2024 will be better.”
Historically wild swings in housing markets that started with the COVID-19 pandemic and have since wrought havoc in tandem with the state’s long-standing housing shortage still have a few quarters to go, Wood and other economists added — at the least.
Here’s some of what they say to expect:
• Utah probably won’t see a recession, though the big job gains it has been enjoying will likely slow down.
• Home prices are dropping relative to their big run-up since 2020 — and nearly a decade before that, for that matter — and they’ll probably keep ticking downward well into this year. But sustained drops amounting to a housing bubble are, in Wood’s words, “extremely unlikely.”
• Future mortgage rates? Projections vary anywhere from 5% to 9% by the tail end of 2023, with prevailing sentiment landing in the 6.5% to 7.5% range. Days of below 3% may be gone for a lifetime.
Home sales in the five-county area centered on Salt Lake City will be sharply down for 2023 and for the country as a whole, forecasters agreed. That’s dejecting news for many home shoppers, real estate agents, the mortgage and title sectors and homebuilders alike.
But unlike during the Great Recession, employment in the state remains strong, with a jobless rate now at 2.2%, the lowest in the nation. Technology companies and Wall Street may be laying off workers, said Lawrence Yun, chief economist and senior vice president for research at the National Association of Realtors, but in Utah, “there’s real job creation.”
The Salt Lake Chamber said this week that November marked the 21st consecutive month unemployment in the state fell below 3%. Derek Miller, its president and CEO, said in a statement Utah remained “a safe haven for business with good governance and wise policy in a globally slowing economy.”
How this housing cycle is different
For housing, that also has meant homeowners aren’t losing their paychecks in droves as they were in the housing crash from late 2007 to 2009. These days, Yun said, instead of the housing glut that swamped the economy 15 years ago, Utah and the U.S. “already had a housing shortage before COVID, and it simply got worse during the COVID real estate boom.”
The Beehive State, in particular, is battling a dire shortage of affordable homes for sale and for rent, and housing is likely to be among the dominant issues of the 2023 Utah Legislature, which convenes its general session next Tuesday.
Utah homebuilders, meanwhile, have pulled back significantly on their hectic pace of housing starts and new development of just a year ago. According to the state’s latest economic report, permits for single-family homes have dropped 32% below where they were last year, the biggest decrease since 2008.
However, Yun said, rents, which have also been rising in Utah at a historic pace, might start slowing in 2023 as a wave of newly constructed apartments come on line.
We’ve got a global pandemic, stimulus spending, blown-up supply chains and a war in Ukraine all fueling inflation the led to the rate hikes, the 1,000 or so real estate agents gathered at Salt Lake City’s Grand America Hotel were told. Many said the annual forecasts set a daunting tone for the year ahead.
Gary Cannon, a veteran broker and founder of Cannon & Company Real Estate Services in West Jordan, praised his fellow agents for their passion and resilience but joked that an era of relatively challenge-free residential sales was over.
“It’s nice to see all these faces again,” Cannon said, “working after five or six years of paid vacation.”
Sellers are ‘waiting for the dust to settle’
Prices on homes in Salt Lake County have edged down every month since May, after about a 25% jump over the year prior and almost doubling during the past five years. The median sales price for single-family homes, condominiums, town homes and duplexes combined in the county fell to $485,829 in December, from $565,600 in May, when the Federal Reserve started its attack on soaring inflation.
So that’s a good sign for those hoping to buy, but they’ve seen their prospective monthly payments all but double over the same time. Pinched hardest in that trend: younger, first-time buyers. Many potential sellers, at the same time, are clinging to home base, delighted with those recent price gains and wary of what’s to come.
“They’re stepping back and waiting for the dust to settle,” Wood said Friday. “We’ve led the country in price increases, so it’s time for a breathing spell.”
When it comes to the prospect of tipping into a recession, the current housing cycle offers a more nuanced picture than past downturns. Utah’s many attractions, its niche as a relatively less-expensive destination state for those fleeing larger cities — and its strong economic rebound since the pandemic — will probably insulate it, economists said, if any national downturn emerges.
“Our official forecast for the state doesn’t point to a recession in 2023 or 2024,” said Wood, who nonetheless acknowledged he “was more on the optimistic side” than many of his counterparts.
Yun voiced optimism, too — for 2024 and beyond. Utah saw its largest wave of out-of-staters moving in since World War II last year, and the national economist said data suggests “more people moving into the region in the future, for better or worse.” Among other effects, that’ll buoy home markets long term.
“Price forecasts for this year are uncertain,” Yun added, “but 10 years from now, the winners will be people who brought property.”
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