A lack of houses for sale is pushing home prices to new highs.
That’s according to a report released Tuesday that showed the Utah median sales price increased more than $100,000 in one year. The median hit a new record high of $435,000 in May, up nearly 30% from $334,974 in May 2020, according to the Utah Association of Realtors.
This is the 110th consecutive month of year-over-year median sales price increases.
The reason for the skyrocketing home prices is not having enough homes for sale.
In fact, for-sale housing inventory is significantly below what is needed to have balance between buyers and sellers. At the end of May, there were fewer than 5,000 homes on the market. That’s down 62% from a year ago.
At the end of May, Utah had less than one month of housing inventory. That’s down from 2.7 months last year. Utah needs about six months of supply, or approximately 20,000 units for sale, to have a balanced market with slower, more sustainable price growth.
Even with the challenges, buyers continue to navigate the strong seller’s market.
Utah home sales increased half a percent with Realtors selling 4,551 properties in May. For the first five months of the year, home sales were up 7% compared to 2020.
The biggest gains in sales were in the above $750,000 price category. Over the past 12 months, sales in this category have more than doubled, up nearly 124%. Meanwhile, sales in price ranges under $300,000 fell because there aren’t enough listings.
“Lack of inventory continues to be the overwhelming factor holding back home sales, but falling affordability is simply squeezing some first-time buyers out of the market,” said Lawrence Yun, chief economist of the National Association of Realtors, in a press release about U.S. existing home sales.
Affordability is also a challenge in Utah. According to the report, a Utah family making the median household income of $85,300 only has 88% of the income needed to buy the $435,000 median-priced home. That’s even taking into account historically low interest rates of 3%.
Last year, a typical Utah family had 112% of the income needed to purchase the median-priced home. Affordability has declined 21% since then.
Nevertheless, even with the challenges of record-high prices and an all-time low inventory, buyers continue to line up.
“While these hurdles have contributed to pricing out some would-be buyers, the record high aggregate wealth in the country from the elevated stock market and rising home prices are evidently providing funds for home purchases,” Yun said in a Wednesday press release about national pending home sales.
Those buyers are quickly snatching up homes. The average time it takes to sell a Utah home is at a record low of 18 days statewide. That’s half the time it took to sell a home last year.
In the midst of a tough housing market, Yun provides some hope for buyers. He said he expects more listings in the second half of the year because of more homebuilding and the winding down of the federal mortgage forbearance program.
“Home price growth will steadily moderate with increased supply, but a broad and prolonged decline in prices is unlikely,” Yun said. “However, if a reduction occurs in some markets, homebuyers will view the lower home price as a second-chance opportunity to get into the market after being outbid in previous multiple-bid market conditions.”
To learn more about housing market conditions in your own area, contact a local Realtor. A directory of Utah Realtors is available at UtahRealtors.com.