Utah Market Update – November 2022
Welcome to Modern & Main Real Estate Market Update. This report will look at Utah’s current real estate market conditions for the entire state.
US Market Conditions.
The US economy grew an annualized 2.6% on quarter in Q3 2022, beating forecasts of a 2.4% rise and rebounding from a contraction in the first half of the year. The biggest positive contribution came from net trade (2.77 pp vs. 1.16 pp in Q2), as the trade gap narrowed. Imports sank 6.9% (vs. +2.2%), while exports were up 14.4% (vs. 13.8%), led by petroleum products, nonautomotive capital goods, and financial services. At the same time, nonresidential investment jumped 3.7% (vs. 0.1%), boosted by increases in equipment and intellectual property. On the other hand, residential investment sank for the 6th quarter (-26.4%) as soaring mortgage rates hit the housing market. Finally, consumer spending grew slower (1.4% vs. 2%) but remained resilient as higher outlays on services (led by health care) offset a decrease in goods, namely motor vehicles and food and beverages. Also, the drag from private inventories was smaller (-0.7 pp vs. -1.91 pp).
How the US Housing Market Fits In.
Amid high inflation, elevated mortgage rates, and slowing sales activity, severely limited housing inventory will prevent large home price drops for most of the country next year, according to NAR Chief Economist Lawrence Yun.
Yun analyzed the current state of the residential real estate market and shared his 2023 outlook today at 2022 NAR NXT, The Realtor® Experience(link is external), in Orlando, Florida.
“For most parts of the country, home prices are holding steady since available inventory is extremely low,” Yun said. “Some places are experiencing price gains, while some places, most notably in California, are seeing prices pull back.”
However, Yun noted that today’s market conditions are fundamentally different than those experienced during the Great Recession.
“Housing inventory is about a quarter of what it was in 2008,” Yun said. “Distressed property sales are almost non-existent, at just 2%, and nowhere near the 30% mark seen during the housing crash. Short sales are almost impossible because of the significant price appreciation of the last two years.”
Driven by the unprecedented rate at which mortgage rates climbed in 2022 – from 3% in January to around 7% today – the downturn in the housing market has had an outsized impact on the nation’s overall economic performance, Yun explained.
“The slide in sales and home building has [brought] down GDP,” Yun said. “If the housing market were stabilizing and not declining, GDP would be positive.”
Yun added that signs point to mortgage rates topping out, particularly as October’s consumer price index showed inflation rising less than expected. He did, however, express concern about the spread between mortgage rates and the federal funds rate.
Utah in the News.
This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors. Although Utah’s economy remains strong, the housing market is now feeling the effects of mortgage rates that were 2.7% higher than in the third quarter of 2021. With rates expected to rise even more in the fourth quarter before hopefully leveling off in early 2023, I anticipate that prices will decline further from their current levels. While this may seem dire to some, homeowners have seen their equity leap since the pandemic started. Though the expected drop in home values may be disconcerting for owners, the market must return to more realistic conditions. I expect that some would-be sellers will decide to wait until the market stabilizes before listing their homes, while others will decide not to sell. This will limit how far inventory levels will rise. As such, I don’t see the market reaching saturation.
The Utah housing market is in a period of reversion that will bring it back to balance, which is positive for the long-term health of the market. Buyers have more choices, but many will wait until financing costs and the market stabilize before they resume their search for a home. We still aren’t in a buyer’s market, but we are certainly getting closer to balance. As such, the needle is moving far closer to the middle than it has been. Click Through Our Market Report For More Market Statistics.
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