Mortgage rates hitting a 20-year high could snowball Utah’s housing crisis
Aug 19, 2023, 9:15 AM
SALT LAKE CITY — Mortgage rates have reached their highest average level in over 20 years. Freddie Mac reported that the United States fixed-rate mortgage averaged 7.09% on Thursday, nearly a 2% jump from the FRM average last year.
Utah Association of REALTORS Government Affairs Director Cate Klundt told KSL that Utah is seeing similar averages, but the state’s housing stock leaves much to be desired.
The housing crisis
High interest rates can have ramifications on whether or not people stake their claim in the housing market. Klundt said rising interest rates can price out people looking to buy a home. Even those ready to make a downpayment may not be able to swing the monthly mortgage payments.
Additionally, Utah is battling a growing housing shortage and higher interest rates can worsen the crisis.
“Utah does one really important thing, which is that it keeps people who are like me, who have a really low interest rate, in their house,” Klundt explained. “And when you keep people in their house, you’re not freeing up those houses for people who may need them.”
People may not want to let go of the homes they have now, but Klundt notes that Utah has seen a burst of new housing construction in the last few years. She said when the state hit a difficult housing crisis around 2009, construction didn’t keep up with the demand for the next decade.
“Now you’ll see a lot of construction, you’ll see a lot of housing going up,” she said.
However, Utah still sits at a deficit. This deficit and homeowners remaining stagnant keep costs high, making the housing market a difficult one to break into.
Can you swing it?
Home value in Utah is rising with interest rates, which is a good thing for those who may refinance their home. Though Klundt said rising value still won’t help the people who just can’t afford the monthly payments.
“If you have the money to put down a down payment and to be able to take the 7% interest rate,” she said, “my advice… would be to buy the house because participating in the housing market at any level is gonna be better than not participating at all.”
And, as we’ve seen time and time again, interest rates fluctuate. Klundt expects the rate to come down closer to 5% or 4% in the next few years.
“If you can swing it, if you can make that monthly payment and hold on for a few years, then I think you’ll get the chance to refinance and then you’ll be able to participate in the housing market.”
Related: Mortgage rates soar to their highest level in 21 years
