July 7, 2022

After two years of a white-hot real estate market, conditions are beginning to change — and that means sellers will also need to make changes.

While the market still favors those with houses for sale, it’s important to remember that sellers no longer have all the power as they did a few months ago. The recent spike in interest rates — from 3% at the beginning of the year to more than 5% now — and the subsequent affordability challenges have sidelined many buyers.

That has allowed much-needed housing inventory to grow. In May, the number of homes for sale in Utah grew nearly 60% as buyer competition declined.

While we’re still in seller’s market territory, the reduced buyer demand will require sellers to make some changes. Here are a few of the top mistakes sellers should avoid:

Overpricing the home

The days of buyers paying tens of thousands over list price appear to be over. Sellers are receiving fewer offers and seeing less activity.

Buyers who are in the market are keenly aware of current conditions. They know what comparable homes are selling for, and they can spot when a property’s price is too high.

If you overprice your home, you risk scaring off otherwise-interested buyers. Additionally, if the home sits for too long, your house will rank lower in search engine results, resulting in fewer views. As the home lags on the market, there’s also the risk that buyers start to wonder if there’s something wrong with the house.

Because of these reasons, overpriced homes often end up selling for less than what they would have if they were properly priced in the beginning.

A Realtor will analyze current conditions to help you establish a price based on today, not the market of a few months ago. Listen to your agent, ask questions and be wary of anyone who prices your home based on what they think you want to hear.

Also, beware of the comparison trap. Just because your neighbor’s house sold for $50,000 over asking price doesn’t mean you should expect the same. You’re selling a different house in a different market.

Inadequately preparing the home

Any longtime real estate agent knows it takes work to sell a home. As market conditions begin to favor buyers, sellers need to make sure their homes look their best.

Key strategies for making your home as attractive as possible are cleaning, decluttering and depersonalizing. Make sure the home is free from odors and has a well-kept exterior since that’s the first thing buyers see.

If you decide to do any home improvements, make sure to use neutral colors that will appeal to many people.

The goal is to make the home look like a model home for every showing so buyers can imagine themselves living there. It’s also important to leave the home when it’s being shown so it’s easier for buyers to imagine the home as their own.

The hot market of the past two years was an anomaly; don’t get complacent and assume the home will automatically sell without work.

Being unwilling to negotiate

When sellers received dozens of all-cash offers over list price with inspection and appraisal waivers, they didn’t need to worry about concessions. But conditions have changed in recent months, and some negotiation might be required.

Carefully evaluate any offers you receive with your Realtor. Remember, an offer that includes some concessions, such as paying the buyer’s closing costs, may still be a good offer based on current market conditions.

Don’t miss out on a chance to sell your home for a great price because you’re unwilling to negotiate.

To learn more about selling a home in today’s market, contact a local Realtor.

How have investors impacted Utah’s housing shortage?

June 30, 2022

Several recent news stories have talked about the impact of real estate investors on the housing market. Of particular interest are findings from Harvard’s “The State of the Nation’s Housing 2022” report, which show growth in investor purchases since the pandemic and a subsequent reduction in homes available to owner-occupants — especially first-time and moderate-income buyers.

For example, 28% of U.S. sales per month during first quarter 2022 were to investors compared to 19% a year earlier. The share is also up substantially from the 16% average from 2017-2019.

Investors have also been active in Utah’s housing market. Here’s a look at how the Beehive State compares to the U.S.

Institutional buyers purchased about one in six Utah homes

The share of residential home purchases to institutional buyers was 16% in Utah in 2021, according to a May report from the National Association of Realtors. That puts Utah at No. 10 on the list of states with the highest share of institutional buyers, even though Utah saw a 0.6% decline from 2020.

The study defines institutional buyers as companies, corporations or limited liability companies that purchase homes.

On the local level, Utah had several counties with a large percentage of institutional buyers including Carbon County followed by Summit County. Other counties with a high share included Cache, Box Elder, Weber, Salt Lake, Wasatch, Iron and Washington followed by Davis and Utah counties.

The NAR report said certain conditions appeal to institutional investors, including high household growth, a high density of Millennials, high education, many people moving to the area, a low vacancy rate, strong sales activity over the past decade, fast rent growth and fast home appreciation in affordable areas — all elements found in Utah.

With such appealing conditions, this may explain why Utah has a higher share of institutional buyers compared to the U.S. (16% versus 13%).

Housing shortage not caused by investors

While there is a presence of investors in Utah’s housing market, the housing shortage is the result of insufficient home-building activity rather than investor purchases.

From 2010-2020, Utah created a housing shortage of 44,500 units because of significant cuts in housing production combined with new household formation, according to the Kem C. Gardner Policy Institute.

In fact, the combination of a lack of home building after the Great Recession, the huge generation of Millennial buyers reaching the prime ages for home-buying, people moving to the state because of a favorable economy, and supply-chain and labor challenges have all contributed to rising home prices in Utah.

“The growth of institutional investors is a symptom, rather than the cause, of extremely tight housing markets,” said Jenny Schuetz, a senior fellow at Brookings Metro, in a June 28 statement to the U.S. Housing Committee on Financial Services.

“Since the Great Recession, the U.S. has not built enough housing leading to historically low vacancy rates and rapidly rising costs,” she said. “Private equity firms and other institutional investors benefit from tight housing supply, but they did not create the problem. Local governments across the U.S. have adopted policies that make it difficult to build more homes where people want to live.”

While there’s still work to be done to address Utah’s affordable housing challenges, the good news for today’s home buyers is they have more choices than they did just a few months ago.

In fact, the number of active Utah home listings increased about 60% in May, according to the Utah Association of Realtors.

To learn more about what’s happening in your housing market, contact a local Realtor.

May housing inventory up nearly 60%

June 16, 2022

Utah home buyers are beginning to see more housing choices as higher interest rates calm the market from the red-hot levels seen over the past two years.

That’s according to the Utah Association of Realtors’ May 2022 Monthly Market Indicators report, which includes information about key real estate metrics.

As one example of the changing market, the inventory of Utah homes for sale jumped nearly 60% in May compared to one year ago — the third consecutive month of year-over-year inventory increases. Prior to March, year-over-year inventory hadn’t increased since August 2019.

The number of new listings also grew 23% in May — another sign that buyers’ choices are expanding.

While the number of homes for sale has been rising, it doesn’t mean the housing shortage is over. The roughly 7,200 homes for sale at the end of May is still less inventory than the 10,000+ homes on the market two years ago. It’s also well below the approximately 20,000 units needed for a balanced market.

As an illustration, Utah would need six months’ worth of inventory to get to a balanced market. At the end of May, the state had 1.6 months. That’s better than 0.9 months last year but still well below the six-month mark.

Realtor.com described a similar situation nationally:

“Our updated 2022 forecast anticipates that demand will continue decelerating through the summer, providing breathing room for the inventory recovery to accelerate,” said Danielle Hale, chief economist for Realtor.com, in a press release about Realtor.com’s updated economic forecast. “As a result, this fall could be an opportune time to find a home — for both first-time and repeat buyers alike. Still, preparation will be key throughout 2022, as it continues to be a seller’s market and asking prices remain high.”

In Utah, prices were also elevated. In May, the median sales price rose to a record $535,050. That’s 23% higher than last year’s median of $435,000.

While home sellers took in more than their asking prices, it wasn’t quite as much as last year. On average, sellers received 102.2% this year versus 103.6% last year.

That’s likely the result of rising home prices and interest rates that are hurting affordability. In Utah, buyers making the median household income only had 66% of what they needed to afford a median-priced home. That’s compared to 104% last year when a median-income buyer could afford the median-priced home.

“Financial conditions have shifted in a big way since the end of 2021 and the housing market is adjusting accordingly,” Hale said. “As Americans grapple with higher prices for everyday expenses while today’s buyers face housing costs that are up 50% from a year ago, recent home sales data shows some are taking a step back from the market.”

That was the case in Utah where sales fell 7.5% in May. Utah Realtors sold 4,286 homes, townhomes and condos during the month. Pending sales also fell nearly 15%, which signals reduced sales activity in the coming months.

As the market normalizes, buyers will likely enjoy more favorable shopping conditions compared to the past two years. These include asking sellers for closing costs and other concessions; taking more time to think about a home before submitting an offer; having fewer buyers to compete with; and seeing a decreased need to use risky strategies like non-refundable earnest money and inspection waivers.

Realtor.com says the “updated 2022 forecast reflects a housing market that is charting a path toward more sustainability, relative to the past two years of ups and downs.”

To learn more about current market conditions and what strategies you should be using as you shop for a home, talk to a local Realtor.