Utah home buyers are beginning to see more housing choices as higher interest rates calm the market from the red-hot levels seen over the past two years.
That’s according to the Utah Association of Realtors’ May 2022 Monthly Market Indicators report, which includes information about key real estate metrics. As one example of the changing market, the inventory of Utah homes for sale jumped nearly 60% in May compared to one year ago — the third consecutive month of year-over-year inventory increases. Prior to March, year-over-year inventory hadn’t increased since August 2019. The number of new listings also grew 23% in May — another sign that buyers’ choices are expanding.
While the number of homes for sale has been rising, it doesn’t mean the housing shortage is over. The roughly 7,200 homes for sale at the end of May is still less inventory than the 10,000+ homes on the market two years ago. It’s also well below the approximately 20,000 units needed for a balanced market.
As an illustration, Utah would need six months’ worth of inventory to get to a balanced market. At the end of May, the state had 1.6 months. That’s better than 0.9 months last year but still well below the six-month mark. Realtor.com described a similar situation nationally: “Our updated 2022 forecast anticipates that demand will continue decelerating through the summer, providing breathing room for the inventory recovery to accelerate,” said Danielle Hale, chief economist for Realtor. com, in a press release about Realtor. com’s updated economic forecast. “As a result, this fall could be an opportune time to find a home — for both first-time and repeat buyers alike. Still, preparation will be key throughout 2022, as it continues to be a seller’s market and asking prices remain high.”
In Utah, prices were also elevated. In May, the median sales price rose to a record $535,050. That’s 23% higher than last year’s median of $435,000. While home sellers took in more than their asking prices, it wasn’t quite as much as last year. On average, sellers received 102.2% this year versus 103.6% last year.
That’s likely the result of rising home prices and interest rates that are hurting affordability. In Utah, buyers making the median household income only had 66% of what they needed to afford a median-priced home. That’s compared to 104% last year when a median-income buyer could afford the median-priced home.
“Financial conditions have shifted in a big way since the end of 2021 and the housing market is adjusting accordingly,” Hale said. “As Americans grapple with higher prices for everyday expenses while today’s buyers face housing costs that are up 50% from a year ago, recent home sales data shows some are taking a step back from the market.”
That was the case in Utah where sales fell 7.5% in May. Utah Realtors sold 4,286 homes, townhomes and condos during the month. Pending sales also fell nearly 15%, which signals reduced sales activity in the coming months.
As the market normalizes, buyers will likely enjoy more favorable shopping conditions compared to the past two years. These include asking sellers for closing costs and other concessions; taking more time to think about a home before submitting an offer; having fewer buyers to compete with; and seeing a decreased need to use risky strategies like non-refundable earnest money and inspection waivers.
Realtor.com says the “updated 2022 forecast reflects a housing market that is charting a path toward more sustainability, relative to the past two years of ups and downs.”
To learn more about current market conditions and what strategies you should be using as you shop for a home, talk to a local Realtor. A directory of Utah Realtors is available at UtahRealtors.com.