Oct. 26, 2022

The rapid rise in mortgage rates created a less competitive housing market in September as affordability challenges kept would-be buyers on the sidelines. However, those buyers who remained in the market experienced much-improved housing selection and the most negotiating power in years.

That’s according to data from the Utah Association of Realtors September Monthly Market Indicators report, which showed Utah home sales falling about 25% in September compared to a year earlier.

With the decline in sales, buyers found themselves with a much-improved selection of houses and greater negotiating power.

For example, the number of homes for sale in Utah increased 79% from last year. There were 12,288 properties available at the end of September versus only 6,850 a year earlier. Not since the start of the pandemic have there been more active real estate listings in Utah.

That’s good news for buyers who want more choices and less competition.

While the market remains in seller’s market territory, conditions have shifted toward buyers.

At the end of September, there were 3.1 months of inventory. That’s a significant improvement from the 1.5 months in 2021 and the 1.4 months in 2020. Traditionally, below six months is a seller’s market, and above six months is a buyer’s market.

There are other signs that conditions are shifting toward buyers.

The average days on market increased to 40 days compared to 21 last September. As the time to sell increases, buyers can take longer to shop and make decisions — versus the past two years when decisions were oftentimes made within hours.

Another sign of a shift is the fact that sellers are more open to negotiation. Over the past two years, sellers on average received about 100% of their original asking price. This September, sellers received an average 96% of list price, indicating that some sellers have lowered prices.

Overall, prices are still higher than last year, but the rate of increase appears to be slowing. In September, the Utah median sales price was $490,000, up 6.5% from $460,000 last year. Earlier in the year, year-over-year price increases were in the 20% range and have slowed since then.

Rising interest rates have hurt affordability. The Utah Realtors Housing Affordability Index — which measures the impact of prices, mortgage rates and incomes — fell 25% from last year. A Utah family making the median income only had 72% of what it needed to qualify for the median-priced home.

“The 30-year fixed-rate mortgage continues to remain just shy of seven percent and is adversely impacting the housing market in the form of declining demand,” said Freddie Mac Chief Economist Sam Khater in an Oct. 20 press release about interest rates. “Additionally, homebuilder confidence has dropped to half what it was just six months ago and construction, particularly single-family residential construction, continues to slow down.”

Even as construction declines, Utah’s housing shortage remains. The Kem C. Gardner Policy Institute estimates the state is still short about 31,000 housing units.

In particular, the state needs entry-level housing. Even though statewide housing inventory increased 79% overall, homes in the less than $300,000 category fell 15% from last year.

“Despite weaker sales, multiple offers are still occurring with more than a quarter of homes selling above list price due to limited inventory,” said Lawrence Yun, chief economist of the National Association of Realtors, in an Oct. 20 press release about U.S. existing home sales. “The current lack of supply underscores the vast contrast with the previous major market downturn from 2008 to 2010, when inventory levels were four times higher than they are today.”

To learn more about current housing conditions and tips for navigating the real estate market, contact a local Realtor.

Buyers see benefits from slower market activity in June

July 23, 2022

As housing demand moderates because of higher interest rates, buyers are beginning to see some benefits from the slower market activity.

That’s according to the latest report from the Utah Association of Realtors that showed housing conditions beginning to normalize after two years of market frenzy.

Statewide, home sales fell 25% in June compared to a year ago with Utah Realtors selling 4,129 properties in June 2022 versus 5,511 in June 2021.

U.S. existing home sales also dipped 14% year-over-year. Experts say the decline is because of affordability challenges.

“Falling housing affordability continues to take a toll on potential home buyers,” said Lawrence Yun, chief economist of the National Association of Realtors, in a press release about U.S. existing home sales. “Both mortgage rates and home prices have risen too sharply in a short span of time.”

With some buyers being priced out of the market, housing inventory has increased, providing more choices to the remaining buyers. In Utah, the number of homes for sale nearly doubled from a year ago. Statewide, there were 10,116 properties for sale in June 2022 versus 5,306 in June 2021.

Months of supply has also increased to 2.3 months from 1.1 months last year. That means competition for homes was less intense this year.

However, it’s important to note that it’s still a seller’s market. Months of supply would need to increase to more than six months to be a buyer’s market.

Contributing to the supply increase is the fact that more homeowners are putting homes up for sale. In June, Utah new listings increased 12%. Sellers put about 800 more homes on the market this year compared to last, which means buyers benefitted from a greater selection of houses when shopping.

“Finally, there are more homes on the market,” Yun said. “Interestingly though, the record-low pace of days on market implies a fuzzier picture on home prices. Homes priced right are selling very quickly, but homes priced too high are deterring prospective buyers.”

In Utah, the average days on market increased 17%, which means buyers had more time to shop for homes. On average, it took 21 days to sell a house in June.

Sellers also received a bit less of their asking price, 100% this year versus 103% in 2021. This means sellers on average sold for their list price but not above it as had become common over the past two years.

One indicator that did not improve for buyers was affordability. The Utah Association of Realtors Housing Affordability Index fell 34% from last year. A Utah family making the median income only had 66% of what it needed to buy the median-priced home. This index takes into account the effect of incomes, home prices and interest rates.

The Utah median price rose to $530,000 in June. That’s up nearly 18% from last year’s median of $450,000. This marks 123 consecutive months of year-over-year increases.

Along with prices, another factor affecting affordability is interest rates, which averaged 5.52% for a 30-year, fixed-rate mortgage in June, up from 5.23% in May, according to Freddie Mac.

Yun speculated on what he expects rates to do in the future.

“If consumer price inflation continues to rise, then mortgage rates will move higher,” Yun said. “Rates will stabilize only when signs of peak inflation appear. If inflation is contained, then mortgage rates may even decline somewhat.”

To learn more about current real estate conditions in your community, contact a local Realtor. 

Home selling mistakes to avoid in a changing market

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.