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.
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.
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.