For that forever renter, good news on buying a new home

SALT LAKE CITY — Is there a glimmer of hope on the horizon for millennials and Gen Zers who are hoping to buy a new home along the Wasatch Front instead of being confined to life as the forever renter?

The single greatest threat to the future prosperity of our state is the price of a home. It’s the inability, the unaffordability, of homes in our state.”

Utah Gov. Spencer Cox

KSL producer and millennial Caitlyn Johnston says she wants to buy a new home but would struggle coming up with a $2,000 monthly payment. She said she would need a second income.

“I’m almost 30. I would think I would be in a different spot by now,” she said. “I think the single people need some more help because I don’t think that being married should be a qualification to buy” a home.

But there is good news.

Can’t afford closing costs? How about $20,000?

First, the Utah’s First-time Homebuyer Assistance Program  which loans first-time buyers $20,000 to purchase a house — but only new homes priced at $450,000 or less qualify.

The average Utah home value is $510,836, according to Zillow. Would $20,000 be enough for Johnston to move into her first home?

“I don’t want to say it’s not enough because it’s something, and I appreciate the something. I think that it’s great that the state is doing this, and it makes me excited,” she said.

She said she couldn’t afford the $3,000 monthly payment on a $450,000 home. She added her current debt situation prevents her from building up her savings to put toward mortgage payments.

“I would say $1,500 a month is what I could possibly afford on my own,” Johnston said.

Cost of borrowing money is falling

Mortgage rates have fallen over the past two months, says Robert Spendlove, who is senior vice president and economic and public policy officer at Zions Bank.

“If you look at the the average rate reported by Fannie Mae, it’s about 7.22%. So about seven and a quarter percent,” he said. “But then each different lender can have different rates that they’re willing to offer.”

On Friday, Dec. 8, 2023, the current average 30-year fixed mortgage interest rate is 7.41%, decreasing 16 basis points over the last seven days, according to Bankrate.

Spendlove said mortgage rates are a function of the bond market, specifically the 10-year bond, which has fallen from over 5% to about 4.2% to 4.3%. The mortgage rates are about 2 to 3 percentage points above that.

“On October 26, the average 30-year mortgage was right around 7.8%, moving really closely to that 8% And now we’ve dropped about half a percent down from that. So we are seeing those conditions easing a little bit,” said Spendlove said.

What do mortgage rates look like in 2024?

Spendlove said the Federal Reserve doesn’t want to see mortgage rates drop too fast because “ultra-low rates” are exactly what drove the housing market to overheat, lifting housing prices up and up.

“So just to give you some perspective, a year ago, the average home price in Utah was $545,000. It bottomed out in May of this year at about just over $500,000, $503,000

“It started to heat up a little bit. We’re now at $510,000. And so if those rates come down too much, then we could start see that reheating. So the Fed is going to do what they can to prevent that reheating of the housing market,” Spendlove said.

So for Producer Johnston, the situation for buying your first home is not quite there yet, but it’s closer. 

Related:

• Utah will loan first-time homebuyers $20,000 for new homes
• Utah homeowners hit with high property taxes as home prices soar

Dave & Dujanovic can be heard weekdays from 9 a.m. to noon. on KSL NewsRadio. Users can find the show on the KSL NewsRadio website and app, as well as Apple Podcasts and Google Play.