BUSINESS + ECONOMY

Utah home prices not likely to fall soon, says real-estate expert

Feb 28, 2024, 7:00 AM | Updated: May 6, 2024, 3:09 pm

A "For sale" sign in front of a home in North Salt Lake. Home listings for sale went up 23% in Apri...

A "For sale" sign in front of a home in North Salt Lake. Home listings for sale went up 23% in April. (Megan Nielsen/Deseret News)

(Megan Nielsen/Deseret News)

SALT LAKE CITY — If you blinked, you might have missed it when Utah home prices fell in December. But by January they were back up and so too were interest rates. And a Utah real-estate expert says lower home prices aren’t likely again without the inventory of housing units being replenished to meet demand.

The average median home price in Utah is $563,000, up by 6.0% year over year. In 2024, the median sale price should keep increasing marginally due to the state’s tight inventory, according to Houzeo

Mortgage interest rates hit 7.79% in October of 2023, the highest level they’d been in 23 years. But the rate dropped to 7.35% in November due to the softening labor market and slowing economy.

Going forward, Houzeo predicts mortgage interest rates will remain above 6% but will stabilize during the second half of 2024.

Let’s ask the expert

Dejan Eskic of the Kem C. Gardner Policy Institute blames interest rates for causing Utah’s housing shortage.

“All of last year, we’ve had interest-rate growth,” he told Dave & Dujanovic on KSL Newsradio. “We peaked at the end of October by just touching 8%.

 

“We came down to about 6.5 % but then still have persistent inflation,” he said, “and the latest numbers were a little bit higher than people were comfortable with. So the Treasury markets went up again and that brought the mortgage rates back up to just over 7% again,” Eskic said.

He added that for interest rates to drop the economy has to worsen, as was the case during the COVID-19 pandemic and the U.S. financial crisis of 2007-08.

For home prices to fall, he said, you have to have a glut of new inventory.

“People have to lose their home. How does a person lose their home? They lose their job. They can’t make the monthly payments,” Eskic said.

Teaser rates: pros vs cons

Without resupplying the inventory of housing units, how does the mortgage interest rate come down? 

“A lot of home builders have a lot of programs right now where they’ll buy down your interest rate. I think most home builders in our market are offering interest rates in the fives. That’s a huge discount when you think about it,” he said.

Keep in mind, prospective home buyers, that the interest rate offered by builders is a teaser rate that will rise back to market levels in a matter of years.

Eskic said the idea behind the interest rate is to eliminate the volatility in the mortgage market.

“We saw from a month ago mortgage rates are up almost a percentage point, so that wreaks havoc on potential buyers but also builders,” Eskic said.

Apartments, now that’s a different story

The for-sale side is much different than the for-rent side of the Utah real estate market now. 

“What we’re seeing with apartments … is we’re getting a glut of supply. We’re seeing rents drop, and we’re seeing incentives being offered — a month or two free of rent.

“So we’re seeing that supply and demand in action, where supply for the first time in what feels like decades has outpaced demand on the apartments,” said Eskic.

Related:

Utah homeowners hit with high property taxes as home prices soar

Dave & Dujanovic can be heard on weekdays from 9 a.m. to noon.  

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Utah home prices not likely to fall soon, says real-estate expert