The Utah housing market started the year at a strong pace, but exceptionally low inventory levels are holding back many prospective buyers who would have purchased homes had more choices been available.
The Utah Association of Realtors reported that January sales were even with the number of homes sold in 2020. The 3,218 transactions tie last year’s January record, but this strong activity could have been even higher had more homes been available for sale.
The situation was similar on the national level where sales were strong, but limited housing supply held back many buyers.
“Home sales continue to ascend in the first month of the year, as buyers quickly snatched up virtually every new listing coming on the market,” said Lawrence Yun, chief economist of the National Association of Realtors, in a press release. “Sales easily could have been even 20% higher if there had been more inventory and more choices.”
In Utah, housing inventory declined sharply in January, falling by 64% from January 2020. For every three homes on the market last year, there’s now approximately only one. In comparison, U.S. housing inventory is down 26% from a year ago.
Utah’s housing shortage was particularly pronounced in January. At the end of the month, there were only about 4,200 homes for sale for the entire state. That’s compared to 11,628 properties in 2020 and 13,583 in 2019. Even in 2019, when the market had triple the number of homes for sale, it was still a strong seller’s market.
When combining the inventory with the current housing demand, there is only 0.8 months of supply. This is a record low and means buyers are facing unprecedented competition for the houses that are available.
Because of the lack of housing inventory, Utah pending home sales fell 7%. National pending sales were up 13% from a year ago but down about 3% month to month.
“Pending home sales fell in January because there are simply not enough homes to match the demand on the market,” Yun said. “That said, there has been an increase in permits and requests to build new homes.”
In Utah, supply is most needed for entry-level buyers. Competition is highest in the price categories between $200,000 and $500,000 with only half a month of supply. The least competitive segment is homes priced above $750,000 at 2.6 months.
Historically, less than six months of supply is a seller’s market, and more than six months is a buyer’s market.
Even though the number of new listings statewide was down 21% in January, there may be some hope for would-be buyers who would like to see more choices.
“There will also be a natural seasonal upswing in inventory in spring and summer after few new listings during the winter months,” Yun said. “These trends, along with an anticipated ramp-up in home construction will provide for much-needed supply.”
Until there is more inventory, however, buyers should expect lots of competition. Homes are selling faster than ever and prices continue to rapidly rise.
In January, the Utah median sales price rose 17% to $379,327. That’s an increase of more than $55,000 from last year.
Fortunately, low interest rates have softened the effect of the higher prices. Moving forward, mortgage rates are likely to remain low, but Yun cautioned they could rise a bit because of the improving economy and expectations for increased inflation.
“I don’t foresee mortgage rates jumping to an alarming level, but we should prepare for a rise of at least a decimal point or two,” Yun said.
To learn more about housing conditions in your own area, contact a local Realtor. A directory of Utah Realtors is available at UtahRealtors.com.