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Salt Lake

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July 2022

SALT LAKE PARADE OF HOMES PREVIEW p. 10

Homebuilders Face Market Correction p. 26

David Weekley Homeowners Madison, Maxine & Melyna Flores

You will spend a lot of time in your new home. So at David Weekley Homes, we spend a lot of time ensuring your completed home makes you happy. Our Personal BuilderSM Team works with you throughout the entire home building process to make sure your home is the place you’ve always dreamed of. And with our unique EnergySaver™ and FlexSpaceSM features, it will be your dream home for years to come, even as those dreams – and your family – grow. That’s The WeekleyWay!

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Learn more about our Quick Move-in Homes by scanning this QR code See a David Weekley Homes Sales Consultant for details. Prices, plans, dimensions, features, specifications, materials, and availability of homes or communities are subject to change without notice or obligation. Illustrations are artist’s depictions only and may differ from completed improvements. Copyright © 2022 David Weekley Homes - All Rights Reserved. Salt Lake City, UT (SLC-22-001883)

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Turning Houses into Homes®

Table of Contents Features 10 The Salt Lake Parade of Homes Celebrates 76 Years

Grispb ©/Adobe Stock

18 James Wood Receives Lifetime Achievement Award The Kem C. Gardner Policy Institute

New-Home Costs Rising at Unparalleled Rate

20 New-Home Costs Rising at Unparalleled Rate Melissa Dittmann Tracey 24 What Is a Recession and Are We in One Now? Josh Mitchell, The Wall Street Journal 26 What’s Ahead for Utah’s Home Building Boom? James Wood 34 2022 RPAC Golf Tournament

MichaelJBerlin ©/Adobe Stock

Columns

What Is a Recession and Are We in One Now?

7 Two Reports Point to Changes in Utah’s and Nation’s Economy Steve Perry – President’s Message

Departments 8

Happenings

In the News

36 Housing Watch

On the Cover:

Image licensed by Ingram Image

Cover Photo: Wright Homes

What’s Ahead for Utah’s Home Building Boom?

This Magazine is Self-Supporting Salt Lake Realtor® Magazine is self-supporting. The advertisers in this magazine pay for all production and distribution costs. Help support this magazine by advertising. For advertising rates, please contact Mills Publishing at 801.467.9419. The paper used in Salt Lake Realtor® Magazine comes from trees in managed timberlands. These trees are planted and grown specifically to make paper and do not come from parks or wilderness areas. In addition, a portion of this magazine is printed from recycled paper.

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July 2022 volume 82 number 7

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The Salt Lake REALTOR® (ISSN 2153 2141) is published monthly by Mills Publishing, located at 772 E. 3300 South, Suite 200 Salt Lake City, Utah 84106. Periodicals Postage Paid at Salt Lake City, UT. POSTMASTER: Send address changes to: The Salt Lake REALTOR,® 772 E. 3300 South, Suite 200 Salt Lake City, Utah 84106-4618.

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EY Salt Lake LE Maga zine UT President Morelza Boratzuk RealtyPath IC Steve Perry Presidio Real Estate Hannah Cutler NA First Vice President Coldwell Banker Rob Ockey JO Century 21 Everest Laura Fidler Summit Sotheby’s LE Second Vice President Amy Gibbons Dawn Stevens Keller Williams TZ Presidio Real Estate Jennifer Gilchrist DY Treasurer Utah Key Real Estate Claire Larson Tony Ketterling IA Woodside Homes Equity Real Estate ON Past President John Lucky Matt Ulrich Berkshire Hathaway SA Ulrich Realtors Jodie Osofsky Signature Real Estate Utah CEO NG Curtis Bullock Janice Smith PS Directors Coldwell Banker Carlye Webb YD Jenni Barber Summit Sotheby’s Berkshire Hathaway AN information may be obtained by calling KO Advertising (801) 467-9419 or by visiting www.millspub.com EY LA Managing Editor Dave Anderton ER Publisher DO Mills Publishing, Inc. www.millspub.com NE President Dan Miller NA Art Director NA Jackie Medina CA Graphic Design Sales Staff Ken Magleby Paula Bell GIE Patrick Witmer Paul Nicholas Office Administrator TT Cynthia Bell Snow RA Salt Lake Board: (801) 542-8840 AY e-mail: dave@saltlakeboard.com

REALTOR

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The Salt Lake Board of REALTORS® is pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the nation. We encourage and support the affirmative advertising and marketing program in which there are no barriers to obtaining housing because of race, color, religion, sex, handicap, familial status, or national origin. The Salt Lake REALTOR® is the monthly magazine of the Salt Lake Board of REALTORS®. Opinions expressed by writers and persons quoted in articles are their own and do not necessarily reflect positions of the Salt Lake Board of REALTORS®. Permission will be granted in most cases, upon written request, to reprint or reproduce articles and photographs in this issue, provided proper credit is given to The Salt Lake REALTOR®, as well as to any writers and photographers whose names appear with the articles and photographs. While unsolicited original manuscripts and photographs related to the real estate profession are welcome, no payment is made for their use in the publication. Views and opinions expressed in the editorial and advertising content of the The Salt Lake REALTOR® are not necessarily endorsed by the Salt Lake Board of REALTORS®. However, advertisers do make publication of this magazine possible, so consideration of products and services listed is greatly appreciated.

OFFICIAL PUBLICATION OF THE SALT LAKE BOARD OF REALTORS ® REALTOR® is a registered mark which identifies a professional in real estate who subscribes to a strict Code of Ethics as a member of the NATIONAL ASSOCIATION OF REALTORS®. October 2005

Two Reports Point to Changes in Utah’s and Nation’s Economy Two new reports point to seismic economic changes in Utah and throughout the United States. The first report, “What’s Ahead for Utah’s Home Building Boom?” was commissioned by The Salt Lake Board of Realtors® and authored by James Wood, Ivory-Boyer Senior Fellow at the Kem C. Gardner Policy Institute. You can read the full report in this issue of Salt Lake Realtor® magazine. The report predicts that it is nearly certain homebuilders will face a market correction; with fewer sales and sluggish prices. However, the prolonged housing boom is due for a correction, not a crash. The report also details a record-shattering year of home building in 2021. Building permits in Utah were issued for 40,000 residential units, breaking the previous record by more than 30%. Because of this, the statewide cumulative housing shortage now stands at 31,000 compared to about 56,000 in 2017. The report goes on to outline a new phenomenon, existing home prices exceeding that of new home prices. Since 2017, the median sales price of an existing home has increased by 85%—$325,000 to $603,400— while the median price of a new home has increased by only 25%—$383,697 to $482,300. Why the switch? Location, location, location. “Many new home developments are on the periphery, hence considerable distance from employment centers,” the report continued. “Thus, the price gap is partly an indicator of the premium the homebuyer is willing to absorb or pay for an existing home closer to employment centers, thus avoiding long commutes from far-flung new subdivisions.” A second report, by The Wall Street Journal, determined that the pandemic has changed the geography of the American economy as workers and employers have moved from the coasts to the middle of the country and Florida. In fact, since February 2020, the month before the pandemic began, U.S. jobs located in red states increased by 341,000 jobs, while blue states were still short 1.3 million jobs as of May. “Remote work allowed many workers to move to red states, not because of political preferences, but for financial and lifestyle reasons–cheaper housing, better weather, less traffic and lower taxes,” the Journal said. Indeed, Utah ranked No. 7 in numeric growth, adding 56,291 people from 2020 to 2021, according to the Census Bureau. Most of that growth came from net migration. Net migration contributed to 59% of Utah’s population growth over the past year, up from 49% the year before, according to the Kem C. Gardner Institute. The good news going forward is short-term economic corrections may prove a welcome turning point and move us to a normalized housing market. Home builders are exceeding current demand and slowly erasing the state’s housing deficit. Utah’s unparalleled quality of life and economic engine will continue to make the housing market a bright spot going forward.

Steve Perry President July 2022 | Salt Lake Realtor ® | 7

Happenings

In the News

Image licensed by Ingram Image

Housing Correction Coming? According to Bloomberg.com, a housing correction will reach from “coast to coast” in the US, but it will fall short of a crash, according to Mark Zandi, chief economist at Moody’s Analytics.

Median Price of Single-Family Homes Sets New High The median price of single-family homes sold in May reached $650,000, a new high. Single-family home prices have climbed 80% over the past five years in Salt Lake County. However, higher mortgage interest rates, rising inventory, and 12 consecutive months of falling home sales are likely to slow the trend.

Realtor Reaches RPAC Investment Milestone ®

Troy Peterson, co-owner and broker of Equity Real Estate (Solid), has made $50,000 in lifetime contributions to the Realtors® Political Action Committee (RPAC). He joins nine other Salt Lake Realtors® who have achieved the same level of investment. Troy earned his real estate license when he was 21 years old. Today, he oversees more than 400 agents. Troy was the 2017 president of the Salt Lake Board of Realtors® and the Board’s 2021 Realtor® of the Year. Troy’s advice to new agents: “Don’t be afraid to fail. Don’t give up. Always get back up after you fall.” 8 | Salt Lake Realtor ® | July 2022

With the Federal Reserve introducing the biggest increase in interest rates in years to combat rising inflation, home prices will likely fall in the housing markets that are most “juiced,” said Zandi. Regions with signs of significant speculation, namely in the Southeast or Mountain West, can expect the pendulum to swing back. Cities and states due for a correction include Phoenix and Tucson in Arizona, the Carolinas, northeast Florida, and above all, Boise — “the most overvalued market in the country,” per Moody’s analysis. If it comes, a drop in housing prices isn’t going to bring much immediate relief to renters, Zandi cautioned. With the supply of starter homes for buyers so limited, and interest rates rising, would-be buyers will have limited options to move from leases to loans. Rising permits and construction for multifamily housing will relieve pressure some, causing rent growth to increase less rapidly. Despite the broad reach of a looming price adjustment, a crash is unlikely, he said. The quality of mortgage underwriting is high. Most loans are “plain vanilla” 30-year or 15year fixed-rate products, with no sign of the subprime or negative amortization activity that precipitated the foreclosure crisis. “I just don’t see the kind of mortgage defaults and distressed sales that would be necessary for big declines in housing values. That’s when you get crashes, when you have lots of foreclosures and a lot of distressed sales,” Zandi said. “That’s just not going to happen.”

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The Salt Lake Parade of Homes Celebrates 76 Years The Salt Lake Board of Realtors® is a major sponsor of the Parade. The Salt Lake Home Builders Association will host its 76th annual Parade of Homes July 29 through Aug. 13. Salt Lake Realtor® Magazine asked Jaren Davis, executive officer of the Salt Lake Home Builders Association, his thoughts of where Utah’s housing market is headed. 1. What’s new in this year’s Parade of Homes? What styles and price ranges make this year unique? We have tried to push further in seeing that all housing types, styles, sizes, and prices are available for our attendees to see. In this year’s Parade, you will find a 22-story, class A, apartment building in downtown Salt Lake. It will be like living in a Four Seasons Hotel. Magnificent! And, we have homes in the Tooele Valley where are a seeing a lot of Salt Lake County workers calling home. This year’s Parade also has remodeled homes and new ones that push further the innovation and technology in comfortable living.

Breen 2,180 sq. ft. | Salt Lake City

2. As a state, are we making progress in lowering the 45,000-unit deficit of homes needed to meet current demand? This year will be our third year in record-breaking construction numbers! Yet, we are barely able to keep up due to the strength of the housing market’s demand for homes. It will be interesting to see how we are able to navigate the foreseen recession and continue to aggressively attack the need for product. 3. What are the bottlenecks in building new homes today? Land use regulations lie at the forefront of our ability to meet the market demand for smaller detached homes on compact lots. As we work to fix that, we still need labor within our trades, open supply chains, and lower government regulation. 4. As mortgage interest rates rise above 6% and signs of a recession materialize, are new home sales showing any signs of decline? The initial shock of rising rates came during what is felt as unnecessary inflation. The emotion of increased costs put our buyers and sellers back on their heels wondering what would come next. As changes in leadership and improvements to the economy come, we will settle back to a market better suited for housing. The market we left behind was too hot, we see a healthy change on the horizon.

Cowboy & Partners 991 sq. ft. | Salt Lake City

10 | Salt Lake Realtor ® | July 2022

5. Mark Zandi, Moody’s Analytics chief economist, recently said there will be a housing price correction in overheated markets in the coming months, but not a crash. Do you believe the Wasatch Front is due for a housing price correction? The Wasatch Front as a local market is much different from others across the country. Our economy is expected to stay

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July 2022 | Salt Lake Realtor ® | 11

strong. The goal atmosphere will temper our historic growth allowing us to settle in a market where housing prices aren’t stressed higher. Our expectation is to see continued appreciation but at lower rates. 6. As a builder and Realtor®, what advice would you give a first-time home buyer? Should they wait to buy? No, buy now if you can. Prices have stabilized, rates are lower than what they may be next year, and there are nice areas where new homes are being built. In these areas, the demographics mirror our new homeowners and bring conveniences to modern living. 7. Will we ever see mortgage interest rates go down to the 3% range of last year? Likely not in our lifetime. They were historically low. We need to remember the current rates, and those predicted will remain at levels below what has been seen for generations. Homeownership is a safe bet and a wise financial decision.

Ivory Homes

4,543 sq. ft. | Draper

8. Where do you see mortgage interest rates going for the rest of this year? Up another half-percentage point as the feds continue to slow inflation. 9. What can cities do to make housing more affordable? Work with industry leaders such as the Realtor Associations and the Home Builders Associations. Our mission is to build healthy communities. We have professionals whose experience and expertise can help us avoid unnecessary mistakes. 10. What can builders do to make housing more affordable? As mentioned before, we advocate for proper land use regulations, an increased labor force, a better business climate, and sensible policies. Our efforts cross local, state, and national lines working with elected officials and agencies.

Ivory Homes

5,461 sq. ft. | Holladay

12 | Salt Lake Realtor ® | July 2022

11. A report last year by the National Association of Realtors® said that the United States was in the midst of a severe housing shortage as a result of a persistent underproduction of housing over the last decade. Has the trend reversed? In Utah, we set construction records in building new housing for the last three years running. We found ourselves building these homes at a time there was a historic shortage of housing. And during record-setting immigration. We haven’t caught up, but have changed course in building through the shortage.

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July 2022 | Salt Lake Realtor ® | 13

Rainey Homes

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14 | Salt Lake Realtor ® | July 2022

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16 | Salt Lake Realtor ® | July 2022

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Bringing the power of Coldwell Banker to the Heber community with a brand new office, opening July 13th

A powerful force in a unique local market, Managing Broker Reggan Jastram and Innovative Real Estate are joining forces with the power of the Coldwell Banker brand. This dynamic partnership is committed to serving agents with the utmost level of respect, professionalism and personalized service. As an experienced and celebrated real estate professional in the Wasatch Back region of Utah, Reggan has a wide-reaching reputation as a successful and respected managing broker with a proven track record in Park City. She’s also a seasoned agent coach, mentor and continuing education instructor. As a non-competing broker, Reggan enjoys sharing her years of industry knowledge with her team, along with insights into innovative Coldwell Banker® tools, techology and valuable network connections with trusted lending and title partners to help build business success.

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*Based on Coldwell Banker Realty’s property spotlight marketing plan usage data reported through May 31, 2020: On average, sellers whose agents use the plan benefit with a 1% higher sales price. With a national average sales price of $539,682 and a 1% increase in the sales price, that equates to an additional $5,300 in our sellers’ pockets, on average. Affiliated real estate agents are independent contractor sales associates, not employees. ©2022 Coldwell Banker. All Rights Reserved. Coldwell Banker and the Coldwell Banker logos are trademarks of Coldwell Banker Real Estate LLC. The Coldwell Banker® System is comprised of company owned offices which are owned by a subsidiary of Realogy Brokerage Group LLC and franchised offices which are independently owned and operated. The Coldwell Banker System fully supports the principles of the Fair Housing Act and the Equal Opportunity Act.

Pictured: Troy Peterson, 2017 president of the Salt Lake Board of Realtors®, left; Kenny Parcell, 2022 president-elect of the National Association of Realtors®; James Wood, Ivory-Boyer Senior Fellow at the Kem C. Gardner Policy Institute; Lawrence Yun, chief economist of the National Association of Realtors®, and Curtis Bullock, CEO of the Salt Lake Board of Realtors®.

James Wood Receives Lifetime Achievement Award James Wood has been a trusted advisor of housing analysis at The Salt Lake Board of Realtors® for more than 20 years. By The Kem C. Gardner Policy Institute David Eccles School of Business University of Utah The Kem C. Gardner Policy Institute at the University of Utah on June 21 awarded James Wood the Lifetime Achievement Award. For nearly 50 years, Jim has worked tirelessly for the people of Utah, producing vital research in several key areas. His focus topics have included economic development, housing, construction, and real estate, where he has become a trusted source for business and community leaders in helping them make informed decisions. Jim joined the David Eccles School of Business in 1975, where he spent over 25 years working as a researcher and then senior research analyst. He was named director of the Bureau of Economic and Business Research in 2002, serving in that role until 2015 when BEBR merged with the Center for Public Policy and Administration to form the Kem C. Gardner Policy Institute. He is currently the Ivory-Boyer Senior Fellow at the Policy Institute. 18 | Salt Lake Realtor ® | July 2022

Over the course of a remarkable career, Jim has published well over 100 articles and studies related to the Utah economy. This had included important research in areas such as housing markets, community development, regional economics, economic development, and more. He is the foremost expert on housing in the Beehive State, conducting numerous studies on local housing conditions that have become the gold standard for policy makers when addressing serious public policy challenges. His more recent works include research on Salt Lake County’s historic apartment boom, the current state of Utah’s housing market, policy recommendations aimed at addressing housing affordability, and the impact of the Covid-19 pandemic on retail sales. To his colleagues, Jim is known for his work ethic, his unmatched breadth of knowledge, and his dedication to the people of Utah. In addition, he is a friend, mentor, and role model for future generations of public servants who have been inspired by his passion.

13 AMAZING

SALT LAKE COUNTY

LOCATIONS

Grispb ©/Adobe Stock

New-Home Costs Rising at Unparalleled Rate The average cost for materials to build a single-family home jumped 42% from 2018 to 2021, adding thousands of dollars to the price of a new home. By Melissa Dittmann Tracey Inflation is pushing up homebuilding costs at an unprecedented rate, according to Bank of America’s Who Builds the House? report. Supply-chain disruptions and labor shortages are adding pressure to rising prices. The average cost for materials to build a single-family home jumped 42% from 2018 to 2021, adding thousands of dollars to the price of a new home, according to the report. The U.S. median sales price of a new home in April reached a record $450,600, a 20% hike from a year earlier, Commerce Department data shows. The higher material costs have been passed along to home buyers, who are facing the double whammy of rapidly rising mortgage rates. First-time buyers are 20 | Salt Lake Realtor ® | July 2022

increasingly becoming priced out of the new-home market, with only about 10% of new homes in April on the market priced at less than $300,000, according to the National Association of Home Builders. A year prior, that share was 25%. As buyers back away from the new-home market, builders are slowing production. Housing starts have fallen to a 13-month low, and single-family construction dropped 9.2% in May, according to the Commerce Department. “Residential construction material costs are up 19% year over year, with cost increases for a variety of building inputs, except for lumber, which has experienced recent

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declines due to a housing slowdown,” said NAHB Chief Economist Robert Dietz. What’s more, “The increase for mortgage rates for the first half of 2022 has priced out a significant number of prospective home buyers.” Some builders are reducing their prices. For example, the share of new-construction homes with price cuts has quadrupled compared to a year earlier in metro areas like Austin, Texas, and Nashville, Tenn., according to Redfin data. Price cuts in new construction have tripled in Phoenix and doubled in Tampa, Fla. Stuart Miller, executive chairman of homebuilder Lennar, told CNBC that he expects prices will readjust moving forward due to higher mortgage rates, which have nearly doubled over the past year. Rising material costs combined with accelerating mortgage rates have left buyers facing “a little sticker shock, and that will likely lead to a pause … and then some reconciliation,” he said. “But there is still a housing shortage across the country. We’ll adjust prices as need be. … Pricing may come down a bit to accommodate affordability. But America still needs homes, and we’ll continue to fill that void.” Framing lumber and engineered wood have experienced the largest price increases among 22 | Salt Lake Realtor ® | July 2022

materials, according to the Bank of America report. Lumber prices have been volatile over the past year; prices hit an all-time high in 2021, adding $18,600 to the average cost of a new home, according to the NAHB. However, lumber prices have fallen in recent weeks and are trading at yearly lows, though they are still higher than in 2020. Still, housing analysts say it likely will take time before consumers see any savings due to the price dip. Other material costs in home construction also have contributed to rising prices, such as upticks in concrete, flooring and paint. The price of exterior paint jumped 14.5% in the first five months of this year, the NAHB notes. Window and door shortages, which have been blamed for many construction delays, also have added to costs. The plumbing sector has been hit hard by a labor shortage that is also leading to delayed timelines, builders note. Further, inflation is adding to consumer costs in household furnishings, which saw prices climb 9.3% annually in January, according to the Labor Department. Appliances were up 8.5%, and floor coverings up 7.2% in the same time period.

What Is a Recession and Are We in One Now? As the stock market declines and the Fed hikes rates, recession fears are rising. Here’s what to know. By Josh Mitchell The Wall Street Journal MichaelJBerlin ©/Adobe Stock

With inflation high, the Fed raising interest rates, stock markets in bear territory and growing concerns over stagflation, “recession” is yet another economic worry to add to the list. The specter of a recession is looming over economists and chief executives. “For many countries, recession will be hard to avoid,” World Bank President David Malpass said in early June. Though recessions can be painful and scary, they are a natural feature of the economy. Don’t panic. Here’s what you should know.

household income, consumer spending, retail sales and industrial production. The panel considers those figures in tandem. No one figure necessarily stands above the others, said Stanford University’s Bob Hall, the Business Cycle Dating Committee’s chairman. Mr. Hall said the committee generally knows a recession when it sees one. Most typically include sharp drops in output and employment. The tough part is determining just when it started and ended—a task the committee carries out ever so carefully. That’s why the committee waits a while to identify the dates; it wants all possible data to have been collected and finalized. “Every time when we ultimately called a recession, there wasn’t any doubt,” Mr. Hall said.

Due to limited rights, this story is only available in the print issue of the Salt What is a recession? There’s no precise definition. the taskmagazine. of Lake Instead, Realtor A copy of this identifying recessions is left to a little-known panel at Is two consecutive quarters of falling GDP a available Wall Street the National Bureauarticle of Economicis Research, a nonprofit on the recession? academic group. A recession is “a significant decline in No. Journal website but charges may apply. economic activity that is spread across the economy and that lasts more than a few months,” NBER said on its website. Even that definition is loose because NBER ultimately declared the 2020 downturn at the start of the Covid-19 pandemic a recession even though it lasted only a few months. Recession dates are determined by NBER’s Business Cycle Dating Committee, consisting of eight economists at universities around the U.S. They typically make the determination months or even years after a recession ends. Think of the panel as a coroner performing an autopsy—it doesn’t make assessments in real time but instead sifts through data to retroactively determine when expansions end and recessions begin. The NBER has identified 12 recessions dating back to 1948, or one approximately every six years.

What criteria does the committee use? The committee examines a range of economic data including gross domestic product, employment, 24 | Salt Lake Realtor ® | July 2022

That’s a rule of thumb that sometimes appears in news articles and, according to the International Monetary Fund, is used by many analysts and commentators around the globe. But, in the U.S., it has no bearing on the committee, Mr. Hall said. The pandemic-induced downturn lasted just a few months but certainly qualified as a recession in the committee’s eyes because of its severity, he said. Alternatively, a modest decline in output over six months would likely not meet the panel’s definition because the panel only considers “significant” declines in economic activity. “That’s not anything close to the philosophy the committee brings to identifying it,” Mr. Hall said of the rule of thumb. “It really doesn’t make any sense.”

How deep and long are recessions? That varies. Recessions are like snowflakes—no two are exactly alike. The recession that began in 2007 after the housing crash lasted a year and a half. The pandemic-induced

recession that began in early 2020 lasted a few months. They also vary considerably in depth: Employment fell 14% in 2020 and about 6% from 2008 to ‘09, but only about 1% in 1980. The unemployment rate peaked at 14.7% in 2020, 10.8% in 1982, and 10% in 2009, but just 5.7% in 2001.

What’s the difference between a recession and a depression?

This has a few economists ringing the alarm bells. “I think the odds that the U.S. is already in a recession have risen, and this is now our base-case scenario,” said Sébastien Mc Mahon, chief economist at Industrial Alliance Investment Management Inc. in Quebec City, Canada, citing those GDP figures. “I think we should expect GDP growth to zigzag around the 0% level for a few quarters, meaning we could even have a few technical recessions in a row before 2023 is over.”

Due to limited rights, this story is only Mr. Hall said he couldn’t speculate on whether the U.S. A depression is “a more severe version of a recession,” available in the print issue the Salt is currentlyof in recession, pointing to the committee’s said the San Francisco Fed. During the Great Depression, policy of not commenting on such matters until after from 1929 to 1933, inflation-adjusted output fell nearly Lake Realtor magazine. A copy of this panelists have scrutinized the data and made an official 30% and the jobless rate hit nearly 25%, according determination. “We don’t get involved in hypotheticals to a speech by former Fed Chairman Bernanke. article isBen available on forthe Wall Street things that haven’t happened yet, ” he said. However, the NBER said it doesn’t differentiate between Journal website but charges may apply. recessions and depressions.

Is a bear market in stocks a sign of recession?

If GDP falls but employment rises, is that a recession? Such a situation is unlikely to arise: Employment typically falls during recessions as companies lay off workers and stop hiring until the outlook improves. But the question has gained new relevance: Employment has risen strongly through the first five months of this year, yet GDP contracted in the first quarter and the Atlanta Fed’s GDPNow tracker projects 0% growth for the second quarter.

Not necessarily. A sharp drop in the stock market often coincides with recessions, but not always. The best counterexample is 1987, when the stock market crashed in October but the economy continued to grow steadily. Reprinted by permission of The Wall Street Journal, Copyright © 2022 Dow Jones & Company, Inc. All Rights Reserved Worldwide. License number 5334331279867.

July 2022 | Salt Lake Realtor ® | 25

What’s Ahead for Utah’s Home Building Boom?

It’s nearly certain homebuilders will face a market correction; with fewer sales and sluggish prices. The prolonged housing boom is due for a correction, not a crash. By James Wood Ivory-Boyer Senior Fellow at the Kem C. Gardner Policy Institute This report was commissioned by The Salt Lake Board of Realtors®

Residential construction in Utah had a record-shattering year in 2021. Building permits were issued for 40,000 What’s Ahead for Utah’s Building Boom?record by residential units,Home breaking the previous It's nearly certain homebuilders will face a market correction; with fewer sales and sluggish prices. more than 30%. A closer look at not thea data The prolonged housing boom is due for a correction, crash. shows that apartment development drove this record-setting year. By James Wood 2021, permits overInstitute 14,143 apartment Ivory-BoyerIn Senior Fellow at the were Kem C.issued Gardnerfor Policy units, the highest number in Utah’s housing history This report was by The Salt Lake Board of Realtors® andcommissioned not far below the 17,528 permits for single-family homes. Homebuilders, nevertheless, were with permits were Residential construction in Utah had a record-shattering year in pleased 2021. Building issued for 40,000 units, breaking previous recordyear by more than2006, 30%. A closer look 2021,residential which turned out tothebe their best since at the data shows that apartment development drove this record-setting year. In 2021, permits were Figure 1. issued for over 14,143 apartment units, the highest number in Utah's housing history and not far

below the 17,528 permits for single-family homes. Homebuilders, nevertheless, were pleased with 2021, which turned out to be their best yearFigure since 2006, 1 Figure 1.

Residential Building Issued by FigurePermits 1 BuildingConstruction, Permits Issued by Utah Type ofResidential Residential Type of Residential Construction, Utah Source: Kem C. Gardner Policy Institute.

25,000

20,950 17,528

20,000 15,000

14,143

10,000

7,895

5,000

Single Family Homes

Apartments

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

Condo/Townhome

Utah Leader in Single-family Permits – Source: KemCounty C. Gardnerthe Policy Institute.

Nearly one-third of all single-family permits issued

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Utah County the Leader in Single-family Permits – Nearly one-third of all single-family permits for inhomes in Utah County, total 5,512 issued were were for homes Utah County, a total of 5,512aunits in of 2021, Figure 2. Three cities, Eagle units inSprings, 2021, and Figure Three cities, Eagle Mountain, Mountain, Saratoga Lehi,2.accounted for 60% of these permits. Washington County ranked second with overSprings, 3,000 single-family St. George Saratoga and Lehi,permits. accounted fordominated 60% of Washington County activity with 1,300 permits, followed by Washington City with 800. Salt Lake County's ranking these permits. County ranked second dropped to third in 2021, with Washington 2,235 single-family permits. Since 2019, Washington County has challenged Salt Lake County's as the second-ranked home building county, and in 2021, with over 3,000position single-family permits. St. George

26 | Salt Lake Realtor ® | July 2022

dominated Washington County activity with 1,300 permits, followed by Washington City with 800. Salt Lake County’s ranking dropped to third in 2021, with 2,235 single-family permits. Since 2019, Washington County has challenged Salt Lake County’s position as the second-ranked home building county, and in 2021, Washington County clearly captured that ranking with 700 more single-family permits than Salt Lake County.

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Shortage Year Units Households 2010 9,079 24,460 2011 9,085 22,615 28,911 2012 11,918 20,998 37,991 2013 15,009shortage 17,631persists, 40,613 Nevertheless, a housing albeit at a 2014 18,810 20,210 42,013 much lower 2015 level. Data from Zonda, a national housing 17,294 24,151 48,870 research firm, shows that in the Greater Salt Lake Area 2016 20,064 24,426 53,232 2017Counties 23,002 and Morgan, 26,000 56,230 and (Wasatch Front Summit, 2018 24,245 23,139 Wasatch counties), the number of vacant55,124 finished 2019 27,610 24,461 51,975 single-family2020 homes31,797 totaled 918, which amounted to 24,312 44,490 about three 2021 weeks’ supply, Figure 3. A balanced 40,144 26,689 31,035 market, Source: Kem C.generally Gardner Policy Institute. according to Zonda, has about a two to three

Figure 2 Single-family Building Permits Issued by Selected Counties Figure 2

Single-family Building Permits Issued by Selected Counties Source: Kem C. Gardner Policy Institute. 6,000

5,512

5,000 4,000

3,054

months supply of finished vacant homes.

Nevertheless, a housing shortage persists, albeit at a much lower level. Data from Zonda, a national housing research firm, shows that in the Greater Salt Lake Area (Wasatch Front Counties and 2,235 Morgan, Summit, and Wasatch counties), the number of vacant finished single-family homes totaled 918, which amounted to about three weeks' supply, Figure 3. A balanced market, according to Zonda, generally has about a two to three months supply of finished vacant homes.

3,000 2,000

1,627

1,000

Davis

Salt Lake

Utah

Washington

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

Weber

2021

832

Figure 3 Figure 3 Vacant Finished Homes in Greater Salt Lake Area Vacant Finished Homes in Greater Salt Lake Area

Source: Zonda.

4,000

3,590

3,500

Table 1 Utah Housing Shortage: Table 1 Permits for Housing Utah Housing Shortage:Units Permits for Housing Units Compared to Additional Households Compared Additional Households Source: Kem to C. Gardner Policy Institute.

Cumulative Shortage Year Units Households 2010 9,079 24,460 2011 9,085 22,615 28,911 2012 11,918 20,998 37,991 2013 15,009 17,631 40,613 2014 18,810 20,210 42,013 2015 17,294 24,151 48,870 2016 20,064 24,426 53,232 2017 23,002 26,000 56,230 2018 24,245 23,139 55,124 2019 27,610 24,461 51,975 2020 31,797 24,312 44,490 2021 40,144 26,689 31,035 Source: Kem C. Gardner Policy Institute.

1Q22

2Q21

3Q20

4Q19

1Q19

2Q18

3Q17

4Q16

1Q16

2Q15

3Q14

4Q13

1Q13

2Q12

3Q11

4Q10

1Q10

2Q09

3Q08

4Q07

1Q07

a new home has typically been 18% higher than that of an existing home. In Utah County, the has been lower, about 11%. However, in 2021, in both counties, the median price of existing ho far exceeded the median price of new homes. In Salt Lake County, the median price of an exis home in the second quarter of 2022 was 25% higher than the median price of a new home, Fig Figure 4 14% higher than an existing home, Fig 4. In Utah County, the median price of a new home was 5. Median Sales Price of a New Home and Existing

Home in Salt Lake County Figure 4

Source: andHome Zonda. Median Sales Price of a UtahRealEstate.com New Home and Existing in Salt Lake County $700,000

$603,000

$600,000 $500,000

$482,300

$400,000 $300,000 $200,000 $100,000 $0

20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 20 20 20 20 21 22 Q1

households doubling-up.

2Q06

3Q05

Source: Kem C. Gardner Policy Institute. Since the Great Recession, single-family construction 3,000 in Salt Lake County hasconstruction been wellinbelow pre-recession Since the Great Recession, single-family Salt Lake County has been well below 2,500 pre-recessionlevels. levels. For For the years beforebefore the Great Recession (1992-2006), the number of thefifteen fifteen years the Great Recession 2,000 single-family permits in Salt Lake County averaged about 4,350. Over the 15 years since the Great (1992-2006), the number single-family permits Recession (2007-2021), the average number ofofannual permits has dropped by nearly half to 2,400. 1,500 This decline in reflects shrinking availability of developable residential land in Salt Lake County. Salt the Lake County averaged about 4,350. Over the 918 Whereas, in 15 Utahyears and Washington counties, developable land is comparatively abundant. 1,000 since the Great Recession (2007-2021), the 500 number of annual has dropped byof the record home Record Yearaverage Reduces Utah's Housing Shortagepermits - A significant consequence building yearnearly was a reduction the state's shortage. Thethe number of new housing units far half to in 2,400. Thishousing decline reflects shrinking 0 exceeded that of new households; 40,144 housing units compared to 26,689 new households, Table availability of developable residential land in Salt Lake 1. After the record year of 2021, the statewide cumulative housing shortage stands at 31,000 Whereas, Utah and Washington compared toCounty. about 56,000 in 2017.inThe housing shortage should counties, not be interpreted as 31,000 homeless households but rather indicator of a "tight" and unhealthy housing market developable landasis an comparatively abundant. characterized by very low vacancy rates and a growing share of households doubling-up. Price of New Home Compared to Sales Price of Existing Home - Historically, new home prices have been higher Record Year Reduces Utah’s Housing Shortage - A than existing home prices. In Salt Lake County, since significant consequence of the record home building 2005, the median price of a new home has typically year was a reduction in the state’s housing shortage. been 18% higher than that of an existing home. In Utah The number of new housing units far exceeded that County, the gap has been lower, about 11%. However, of new households; 40,144 housing units compared to in 2021, in both counties, the median price of existing 26,689 new households, Table 1. After the record year homes far exceeded the median price of new homes. In of 2021, the statewide cumulative housing shortage Salt Lake County, the median price of an existing home stands at 31,000 compared to about 56,000 in 2017. The in the second quarter of 2022 was 25% higher than the housing shortage should not be interpreted as 31,000 median price of a new home, Figure 4. In Utah County, homeless households but rather as an indicator of a Source: Zonda. the median price of a new wasHome 14% higher than new home pr “tight” and unhealthy housing market characterized Price of New Home Compared to Sales Price home of Existing - Historically, an than existing home, existing homeFigure prices. 5. In Salt Lake County, since 2005, the median pric by very low vacancy rates and a growing share ofhave been higher

New

Existing

Source: UtahRealEstate.com and Zonda. ® | Salt Lake Realtor | July 2022at a much lower level. Data from Zonda, a national Nevertheless, 28 a housing shortage persists, albeit Figure 5 housing research firm, shows that in the Greater Salt Lake Area (Wasatch Front Counties and

home. In just five years, the income required to purchase the median-priced existing home Lake County has increased from $65,829 to $116,057, a 76% increase in five years, Tab Utah County, the rate of increase has been similar, 80%, Table 3. And probably for the fir in 2021, the median price of an existing home in Salt Lake and Utah counties was more t New Existing Table 2 Figure 5 median sales price of a new home. Table 2 Source: UtahRealEstate.com Zonda.Home and Existing Comparison of Mortgage Payment for Median Priced Median Sales Price ofand a New Comparison of and Mortgage forSalt Median Existing Existing NewPayment Home in LakePriced County, Home in Utah County Figure 5 and New Home in Salt Lake County, 2017 and 2022Q11 1 2017 and 2022Q1 Source: UtahRealEstate.com and Zonda. Median Sales Price of a New Home and Existing Home in Utah County 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 20 20 20 20 21 22 Q1

$700,000

$586,195

$600,000

$512,300

$300,000 $200,000 $100,000

20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 20 20 20 20 21 22 Q1

New

New Home

2017 Median sales price $325,000 $383,697 Monthly mortgage payment $1,536 $1,795 Income required for purchase $65,829 $76,929 2022 (first quarter) Median sales price $603,400 $482,300 Monthly mortgage payment $2,708 $2,168 Income required for purchase $116,057 $92,957 Source: UtahRealEstate.com, Zonda, and Freddie Mac Historical Mortgage Rates.

$500,000 $400,000

Existing Home

Category

Existing

Why the switch? Location, location, location. Many 1 new home developments are on the periphery, hencepayment calculations assume a mortgage interest rate of 4% in 2017 and 3.8% in the first q Mortgage 2022, 20% down payment, property tax at 0.0072% of home value, and $100 monthly home insurance considerable distance from employment centers. Thus, required to purchase a median-priced home uses the 28% rule; mortgage payment should not be more tha the price gap is partly an indicator of the premium the Table 3 monthly gross income. homebuyer is willing to absorb or pay for an existing Comparison of Mortgage Payment for Median Priced Table 3 home closer to employment centers, thus avoiding Existing and New Home in Utah County, Comparison of Mortgage Payment for Median Priced Existing 2 long commutes from far-flung new subdivisions. Of and 2022Q1 and New Home2017 in Utah County, 2017 and 2022Q12 course, there are other contributing factors. In the past Existing New Home Home Category few years, homebuilders have become increasingly 2017 concerned about affordability. They have found ways Median sales price $308,215 $343,236 to achieve higher density or have adopted cost-cutting Monthly mortgage payment $1,462 $1,616 measures (less square footage) to help hold down the Income required for purchase $62,657 $69,257 rate of price increases. 2022 (first quarter) Median sales price $586,195 $512,300 Monthly mortgage payment $2,633 $2,315 Income required for purchase $112,843 $99,214 Source: UtahRealEstate.com, Zonda, and Freddie Mac Historical Mortgage Rates.

Mortgage Payment’s Rapid Rise - 2017-2022 –Since 2017, the median sales price of an existing home has increased by 85%—$325,000 to $603,400— while the median price of a new home has increased by only 25%—$383,697 to $482,300. The wide discrepancy in growth rates explains how the median price of anRates and Inflation - From the first week of January 2022 to the last week o Interest existing home has leapfrogged over the price of a new Rates and Inflation - From the first this week mortgage rates haveInterest increased from 3.2% to 5.7%. Historically, is of the largest and sharp months dating back to week 1970.of The risemortgage in rates is rates a response to the home. This leapfrogging is true in both Salt increase Lake andover any six January 2022 to the last June, Reserve's increase of the from federal fund's interest ratethis banks charge for bo Utah counties. Interestingly, the price of a new homeaggressive in have increased 3.2% to rate, 5.7%.theHistorically, is the or lending in rate the federal funds rate ripples through financial m Utah County is higher than in Salt Lake County. Again,to each other. largestThe andincrease sharpest increase over any six months ultimately leading to higher interest rates for consumer loans and mortgages. The Federal R this is likely due to locational factors, such as local dating back to 1970. The rise in rates is a response to has raised interest rates three times in 2022, most recently on June 15th, with an increase of zoning ordinances and building regulations.The aim of the ratethe FederalisReserve’s aggressive increaseIn ofMay, the federal increases to slow the rate of inflation. the consumer pric fund’s rate, the interest rate banks charge for borrowing (CPI) increased at an annual rate of 8.6%, the highest level since 1981. Just how rapid and Affordability is almost always an issue whether a have increased or lending other. prices is shownto in each Figure 6. The increase in the federal Figure 6 homebuyer is looking to buy a new or existing home. funds rate ripples through financial markets, ultimately Year-over Monthly Rate loans and In just five years, the income required to purchase the leading to higher interest ratesInflation for consumer 10.0% median-priced existing home in Salt Lake County has mortgages. The Federal Reserve has raised interest rates 8.6% 9.0% th increased from $65,829 to $116,057, a 76% increase in three times in 2022, most recently on June 15 , with 8.0% five years, Table 2. In Utah County, the rate of increase an increase of 0.75%. The aim of the rate increases is to 7.0% has been similar, 80%, Table 3. And probably for the first 6.0%slow the rate of inflation. In May, the consumer price 5.0% time, in 2021, the median price of an existing home in index (CPI) increased at an annual rate of 8.6%, the 4.0% Salt Lake and Utah counties was more than the median 3.0%highest level since 1981. Just how rapid and sudden sales price of a new home. prices have increased is shown in Figure 6. 2.0%

Ju l Oc Ja t n22 Ap r

Ju l Oc Ja t n21 Ap r

Ju l Oc Ja t n20 Ap r

Ju l Oc Ja t n19 Ap r

Ja n18 Ap r

1.0% 0.0%

1 Mortgage payment calculations assume a mortgage interest rate of 4% in 2017 and 3.8% in the first quarter of 2022, 20% down payment, property tax at 0.0072% of home value, and $100 monthly home insurance. Income required to purchase a median-priced home uses the 28% rule; mortgage payment should Source: Federal Reserve. not be more than 28% of monthly gross income. 2

Ibid.

30 | Salt Lake Realtor ® | July 2022

Ibid.

nding to each other. The increase in the federal funds rate ripples through financial markets, ately leading to higher interest rates for consumer loans and mortgages. The Federal Reserve aised interest rates three times in 2022, most recently on June 15th, with an increase of 0.75%. aim of the rate increases is to slow the rate of inflation. In May, the consumer price index ) increased at an annual rate of 8.6%, the highest6 level since 1981. Just how rapid geographically. and sudden Many countries are experiencing Figure s have increased is shown in Figure 6.

Year-over Monthly Inflation Rate

cost-push inflation. The U.K. has a 9.1% inflation rate, Canada’s rate is 7.7%, Brazil’s 11.7%, and India’s 7%.

Figure 6 Source: FederalInflation Reserve. Rate Year-over Monthly

10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%

Ju l Oc Ja t n22 Ap r

Ju l Oc Ja t n21 Ap r

Ju l Oc Ja t n20 Ap r

Ju l Oc Ja t n19 Ap r

Ja n18 Ap r

8.6%

Source: Federal Reserve.

Economists categorize the causes of inflation into two broad categories; cost-push and demand-pull. In the current environment, there is a good share of both. One of the principal causes of cost-push inflation is an increase in the cost of materials and supplies. Pandemic-related disruption of the global supply chain has led to price increases in a wide array of products from semiconductors, food products, electronics, and building materials, to name just a few. And the impact of the supply disruption has been widespread

Demand-pull inflation is often referred to as “too many dollars chasing too few goods.” Demand-pull inflation’s principal causes are an increase in consumer spending, government spending, and increases in the money supply. All three of these causes underlie the current inflationary pressures. First, consider consumer spending. During the pandemic, household savings rates increased dramatically; from March 2020 until May 2021, households were saving at a double-digit rate, well above the 60-year historical average of 8.9% of disposable income, Figure 7. The savings rate spiked in April of 2020 at a remarkable 33.8%, which is by far the highest rate recorded going back to 1960. Over the last year, the savings rate has dropped to below-average levels, 5.4% in May of 2022, and households are now spending their pandemic savings. The current high consumption rate following the high rate of savings is an example of “too many dollars chasing too few goods” and demand-pull increasing prices.

July 2022 | Salt Lake Realtor ® | 31

well above the 60-year historical average of 8.9% of disposable income, Figure 7. The savings rate spiked in April of 2020 at a remarkable 33.8%, which is by far the highest rate recorded going back to 1960. Over the last year, the savings rate has dropped to below-average levels, 5.4% in May of 2022, and households are now spending their pandemic savings. The current high trillion to $7.2 trillion, a 67% increase in three months. consumption rate following the high rate ofFigure savings 7is an example of "too many dollars chasing too few goods" and demand-pull increasing prices.Rate Ratio of personal And from January 2021 to June 2021, the Federal U.S. Household Savings Figure 7

savings to disposal (after-tax) personal income U.S. Household Savings Rate

Reserve’s balance sheet grew by another $800 billion. The Federal Reserve’s response, over a short 12 months, pumped an extraordinary level of liquidity into capital markets, resulting in lower interest rates and producing a housing boom with the largest single-year price increases in housing history. Housing price increases of 20%, 30%, and even 40% resulted from fiscal and monetary policies designed to avoid a severe recession and the unknown consequences of a global pandemic.

Ratio of personal toReserve disposal Economic (after-tax) personal Source:savings Federal Data. income

40.0% 33.8%

35.0%

26.6%

30.0% 25.0% 20.0% 15.0% 10.0%

5.4%

In hindsight, it is easy to blame the Federal Reserve for overreacting. Still, in the spring of 2020, over three 0.0% billion workers voluntarily left the workforce, and for the first time ever, the global economy was cooperatively Source: Federal Reserve Economic Data. shut down. And the world faced the worst health crisis in 100 years. Without the Federal Reserve’s aggressive Government spending can also cause inflation, and Government spending can also cause inflation, and this has undoubtedly been the case in the last response, a global depression was likely. And instead this has undoubtedly been the case in the last two two years. The fiscal response by the U.S. Congress and the Administration to the pandemic was extraordinary. The response came in three waves. TheU.S. firstCongress wave included Coronavirus ofAir, worrying about inflation in 2022, we’d be talking years. The fiscal response by the andthethe about job losses, falling wages, and failing businesses. Administration to the pandemic was extraordinary. The The Federal Reserve had to pick their poison in 2020, response came in three waves. The first wave included inflation or unemployment, and roll the dice. the Coronavirus Air, Relief and Economic Security Act, otherwise known as the CARES Act, which provided Figure 8 direct economic assistance for workers, families, small Total Assets and Mortgage-Backed Securities Held businesses, and industries. The act was passed in by the Federal Reserve, 2003–2021 March 2020 with a budget of $2.4 trillion. The second (trillions) wave included supplemental assistance to the CARES Figure 8 Total Assets and Mortgage-Backed Securities Held by the Federal Reserve, 2003–2021 Act, known as the Response and Relief Act, passed in Source: Federal Reserve Economic Data (FRED) (trillions) December 2020 with a budget of $900 billion. And the $9.0 $8.1 $8.0 third wave was the American Rescue Plan, which was a $7.0 follow-up to the CARES Act passed in March 2021 with $6.0 a budget of $1.9 trillion. Over 12 months, from March $5.0 of 2020 to March of 2021, $5.2 trillion in assistance $4.0 was approved by Congress and the Trump and Biden $3.0 $2.0 Administrations. The pandemic’s fiscal stimulus was $0.9 $1.0 equivalent to 25% of GDP. That’s a recipe for demand$0.0 pull inflation. 2021

2021 June

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

Trillions

Apr

Jan-22

Jul

Oct

Apr

Jan-21

Jul

Oct

Apr

Jan-20

Jul

Oct

Apr

Jan-19

Jul

Oct

Apr

Jan-18

Jul

Oct

Apr

Jan-17

5.0%

Total Assets Finally, the Federal Reserve’s aggressive response to the Source: Federal Reserve Economic Data (FRED) pandemic provided an enormous amount of liquidity to the U.S. and global capital markets. In 12 weeks, Home Building Home Building Slow and response 2023 - The to Slow in 2022to and 2023in- 2022 The policy to thepolicy pandemic has created an inflationary environment with rising interest rates a threatan of inflationary recession. A recession would from March 11th, 2020, to June 3rd, 2020, the Federal response to the pandemic hasand created probably be mild and occur in mid-2023, but whether it's a slowdown or recession, it's nearly Reserve purchased nearly $3.0 trillion in securities from environment rising interestwith rates andsales a threat of prices. The certain homebuilders will facewith a market correction; fewer and sluggish prolonged housing boom isAdue for a correction, notprobably a crash. Market conditions financial institutions, Figure 8. Over that short period, recession. recession would be mild and are much healthier and 2008. Nevertheless, it's clear that the Federal Reserve is working very hard to the Federal Reserve’s balance sheet grew from $4.3 than in 2007occur in mid-2023, but whether it’s a slowdown or slow the economy by raising interest rates. And the most sensitive sector to higher rates is home recession, it’sremain nearlyaround certain willsingle-family face building. If mortgage rates six homebuilders percent, permits for homes will probably fallabymarket 20% to 14,000 in 2022-2023, and the median salessluggish price of a new home could fall correction; with fewer sales and by 5% to $450,000 prices. The prolonged housing boom is due for a Over 12 months, from March of 2020 to correction, not a crash. Market conditions are much healthier than in 2007 and 2008. Nevertheless, it’s clear March of 2021, $5.2 trillion in assistance that the Federal Reserve is working very hard to slow was approved by Congress and the the economy by raising interest rates. And the most Trump and Biden Administrations. The sensitive sector to higher rates is home building. If mortgage rates remain around six percent, permits for pandemic’s fiscal stimulus was equivalent single-family homes will probably fall by 20% to 14,000 to 25% of GDP. That’s a recipe for demandin 2022-2023, and the median sales price of a new home pull inflation. could fall by 5% to $450,000.

32 | Salt Lake Realtor ® | July 2022

2022 RPAC Golf Tournament The annual RPAC Golf Tournament was held June 20 at the Thanksgiving Point Golf Club. Roughly 150 members took part in 18 holes of golf, raising more than $20,000 for RPAC. Several prizes were given away, including free membership dues. The purpose of RPAC is clear: voluntary contributions made by Realtors® are used to help elect candidates who understand and support their interests. These are not members’ dues; this is money given freely by Realtors® in recognition of the importance of the political process. The Realtors® Political Action Committee and other political fundraising are the keys to protecting and promoting the real estate industry.

34 | Salt Lake Realtor ® | July 2022

Photos: Dave Anderton

July 2022 | Salt Lake Realtor ® | 35

MAY

HOUSING WATCH So Long Seller’s Market

Utah’s housing market is shifting from a seller’s market to a buyer’s market. In May, listings in Salt Lake County increased to 1,947, up 11% from May 2021. As of July 7, total active listings (homes for sale) on UtahRealEstate.com across Utah increased to 8,201, up 161% from a year ago when there were 3,146 active listings. Higher mortgage interest rates, a tanking stock market, and higher home prices have pushed many home buyers out of the market. In May, there were 1,324 closed sales in Salt Lake County, down 14% from 1,531 sales in May 2021. It was the 12th consecutive month of falling sales. The median price of houses (all housing types) sold in May was $555,000, up 23% from $450,700 a year earlier. A typical listing was on the market 13 days in May, the same amount of time as in May 2021. All-cash sales of homes increased to 20% in May in Salt Lake County. That was up from 18% of cash sales in May 2021. Nationally, year-over-year, sales receded 8.6% (5.92 million in May 2021), according to the National Association of Realtors®. “Home sales have essentially returned to the levels seen in 2019 – prior to the pandemic – after two years of gangbuster performance,” said NAR Chief Economist Lawrence Yun. “Also, the market movements of single-family and condominium sales are nearly equal, possibly implying that the preference towards suburban living over city life that had been present over the past two years is fading with a return to pre-pandemic conditions.” Yun added that further sales declines should be expected in the upcoming months given housing affordability challenges from the sharp rise in mortgage rates this year. “Nonetheless, homes priced appropriately are selling quickly and inventory levels still need to rise substantially – almost doubling – to cool home price appreciation and provide more options for home buyers.” First-time buyers were responsible for 27% of sales in May, down from 28% in April and down from 31% in May 2021. NAR’s 2021 Profile of Home Buyers and Sellers – released in late 20214 – reported that the annual share of first-time buyers was 34%. All-cash sales in the U.S. accounted for 25% of transactions in May, down from 26% in April and up from 23% recorded in May 2021. Individual investors or second-home buyers, who make up many cash sales, purchased 16% of homes in May, down from 17% in April and 17% in May 2021. Distressed sales – foreclosures and short sales – represented less than 1% of sales in May, essentially unchanged from April 2022 and May 2021. According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage was 5.23% in May, up from 4.98% in April. The average commitment rate across all of 2021 was 2.96%.

36 | Salt Lake Realtor ® | July 2022

July 2022 | Salt Lake Realtor ® | 37

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O U R 3 8 T H A N N UA L CO M M U N IT Y S E RV I C E DAY

All in, for community. On Friday, June 11th, all Windermere offices across the west coast closed their doors to give back to the community. In Utah, our agents, staff,and managers lent a hand to the National Ability Center to help further their impact in our community.