Utah home buyers seeing more choices as housing inventory rises
June 2, 2022
Utah home buyers had more choices in April as year-over-year housing inventory rose for only the second time since 2019. That’s according to April numbers from the Utah Association of Realtors that show the effect of rising mortgage rates and the continued housing shortage.
The number of active listings in Utah increased nearly 19% in April. Other than March, that’s the first increase in year-over-year inventory since August 2019. Even so, the strong seller’s market remains intact with only 1.1 months of inventory. A normal market has six months of inventory.
“Housing supply has started to improve, albeit at an extremely sluggish pace,” said Lawrence Yun, chief economist of the National Association of Realtors in a press release about U.S. existing home sales.
Because there is still strong demand for the limited number of homes, Utah homes continued to sell quickly. The average number of days to sell a home was 19 in April, which is a record low for this time of year. Additionally, sellers continued to receive more than their asking prices at an average of 103% — about the same as last year.
“The vast majority of homeowners are enjoying huge wealth gains and are not under financial stress with their home as a result of having locked into historically low interest rates, or because they are not carrying a mortgage,” said Yun in a statement about U.S. pending home sales. “However — in this present market — potential homebuyers are challenged and thus may attempt to mitigate the rising cost of ownership by opting for a 5-year adjustable-rate mortgage or by widening their geographic search area to more affordable regions.”
The rise in mortgage interest rates is beginning to affect Utah buyers. Closed sales were down about 15% in April although they remained 9% above levels in April 2020 before the pandemic sales boom.
April pending sales were also down about 12% in Utah. The pending sales figure represents the number of properties that had offers accepted during the month.
“Pending contracts are telling, as they better reflect the timelier impact from higher mortgage rates than do closings,” Yun said, referring to U.S. pending sales that were also down in April. “The latest contract signings mark six consecutive months of declines and are at the slowest pace in nearly a decade.”
The slower sales are a result of declining affordability both in terms of higher home prices and higher interest rates.
In Utah, the median sales price rose nearly 26% in April compared to a year ago. At $534,807, this is a record high and marks 121 consecutive months of year-over-year increases.
“Higher home prices and sharply higher mortgage rates have reduced buyer activity,” Yun said, referring to U.S. existing home sales. “It looks like more declines are imminent in the upcoming months, and we’ll likely return to the pre-pandemic home sales activity after the remarkable surge over the past two years.”
That strain on affordability is evident in the Utah Association of Realtors’ Housing Affordability Index, which has declined 37% in the past year. In April, a Utah family making the median income only had 66% of what it needed to purchase the median-priced home.
“If mortgage rates stabilize roughly at the current level of 5.3% and job gains continue, home sales could also stabilize in the coming months,” Yun said. “Home sales in 2022 are expected to be down about 9%, and if mortgage rates climb to 6%, then the sales activity could fall by 15%.
“Home prices in the meantime appear in no danger of any meaningful decline. There is an ongoing housing shortage, and properly listed homes are still selling swiftly — generally seeing a contract signed within a month.”
To learn more about housing market conditions in your area, contact a local Realtor.