UTAH’S REAL ESTATE MARKET IN 2023

BY: UTAH ASSOCIATION OF REALTORS

After a white-hot market and homebuying frenzy during the pandemic, rising interest rates are now moderating Utah’s housing market.

As of Nov. 30, 2022, the number of active listings had doubled, and year-to-date Utah homes sales had fallen nearly 19% compared to 2021. When annual numbers are released, 2022 will likely have the fewest home sales since 2014.

This is due to a large decline in affordability, which as of November 2022 had fallen 40% from the year prior — a figure which measures the effect of incomes, interest rates, and home prices.

While affordability will likely continue to be a challenge in 2023 because of sticky home prices, high interest rates, and an ongoing housing shortage, Utah home buyers will have advantages that were non-existent during the first years of the decade. These include less competition from other buyers, more time to shop for homes, sellers willing to negotiate, and a greater selection of home choices.

Here’s a closer look at Utah’s changing housing market:

HOUSING MARKET TODAY VERSUS MID-2000S

With the strong run-up in prices over the past few years, Lawrence Yun, chief economist of the National Association of Realtors, said in a 2023 forecast presentation that it’s natural for buyers to wonder if housing prices will crash like they did during the Great Recession.

Yun said that’s unlikely given that today there is a “completely different fundamental backdrop in the marketplace.”

Today’s conditions include more jobs, virtually no subprime loans, lower housing inventory, less construction, and significantly fewer mortgage delinquencies and foreclosures.

Even though sales have slowed, Yun said the data show a national housing shortage. The same is true in Utah, where the state is short 31,000 housing units based on our household growth, according to the Kem C. Gardner Policy Institute.

“Of course, the buyers have retreated now, but hypothetically, if the mortgage rates go down meaningfully and the buyers return, we could again encounter another housing shortage unless we really ramp up production or possibly even convert some of the empty commercial buildings,” Yun said.

HIGHER RATES, SLOWER SALES, AND STICKY PRICES

The National Association of Realtors expects rates on 30-year fixed mortgages to average 5.7% in 2023, while Realtor.com expects a 7.4% average.

“Compared to the wild ride of the past two years, 2023 will be a slower-paced housing market, which means drastic shifts like price declines may not happen as quickly as some have anticipated,” said Danielle Hale, chief economist for Realtor. com in a November 2022 press release. “It will be a challenging year for both buyers and sellers, but an important one in setting the stage for home sales to return to a sustainable pace over the next two to three years.”

Realtor.com forecasts home sales will fall 7.6% in Salt Lake City and 11% in OgdenClearfield in 2023. Although incomes are expected to grow, high rates and prices will likely sideline some buyers. Sales could see a possible rebound in the second half of the year should mortgage rates decline as expected. Realtor.com also predicts 2023 home prices rising 5.8% in Salt Lake City and 6.4% in Ogden-Clearfield.

“Moving forward, home price growth will slow and may even decline periodically as prices largely stabilize over the next two-to-three years,” Realtor.com wrote in its 2023 housing forecast.

Dejan Eskic with the Kem C. Gardner Policy Institute has said he expects Utah home prices to fall 9% year over year while James Wood, also with the Policy Institute, has said he expects only minor blips and flat home price appreciation for the year.

Nationally, Yun predicts no change in U.S. home prices overall.

“Half of the country may experience small price gains, while the other half may see slight price declines,” Yun said in a December 2022 press release.

BUYING OPPORTUNITIES

With Utah’s population expected to increase by more than 1 million in the next 20 years, the long-term outlook for Utah real estate looks bright. While affordability concerns will hold back some would-be buyers in 2023, others will take advantage of incentives from sellers and loan buy-down programs from lenders.

The Utah Association of Realtors recommends working with a local Realtor who will help you navigate the changing market in your local area. Find a directory of Utah Realtors at UtahRealtors.com.