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.