The Wasatch Front has had plenty of snow
But housing inventory remains at records lows
The price of homes have flattened out
High interest rates caused that, no doubt
But I’m still optimistic on the state of our market
As sure as I like hardwood floors better than carpet
The numbers are in for the first quarter of 2024, and they look a lot like they did last year at this time, but it’s a year later, so it’s not the same. So let’s get into the 1st quarter 2024 results for residential real estate in Salt Lake County. This time I’m switching it up and starting with the condo market, and then we’ll get to the single family home market.
1st Quarter 2024 Results for Salt Lake County Condos and Townhomes
The median price for condos and townhomes in Salt Lake County decrease 1.2% from from $416,000 in the 1st quarter of 2023 to $411,000 in the 1st quarter of 2024. If you look at the graph below you’ll see that the median price has been in a range of $406,000 to $415,000 since the 3rd quarter of 2022 when the 30-year mortgage rate rose above 6% for the first time.
The number of condos and townhomes listed for sale in Salt Lake County increased by 18.8%, from 947 in the 1st quarter of 2023 to 1,125 in the 1st quarter of 2024. The number of units sold also increased by 13.6%, from 662 in the 1st quarter of 2023 to 752 in the 1st quarter of 2024. I’m guessing that more people are making a move from condos to single family homes right now and, due to affordability, more people are buying new construction condos.
1st Quarter 2024 Results for Salt Lake County Single Family Homes:
The median price of a single-family home in Salt Lake County increased from $565,000 in the 1st quarter of 2023 to $590,000 in the 1st quarter of 2024, a 4.4% increase, but is down 2.2% from $603,000 in the 1st quarter of 2022.
If you look at the graph below, which shows the median price of a single family home in Salt Lake County over the last five years, you’ll see from the green line on the graph, that high interest rates have flattened the curve for price appreciation, with the median price of a single family home in Salt Lake County increasing by 65.7% from $356,000 in the 1st quarter of 2019 to $590,000 in the 1st quarter of 2024.
That comes out to an annual appreciation rate of 10.7%, which is much more reasonable that the annual appreciation rate of 22.5% (50% in two years) that we saw during the rally in home values that occurred from the 1st quarter 2020 with a median price of $402,000 to the 1st quarter 2022 when the median price hit $603,000.
The average 30-year mortgage rate is around 6.8% per Freddie Mac. These high rates continue to keep the inventory of homes listed for sale at all time lows due to the “lock-in” effect caused by the pre-inflation low interest rate mortgages that most home owners possess.
The graph below shows the number of homes listed for sale by quarter since the 1st quarter of 2019. Mortgage rates began to increase in January 2022, with the average 30-year mortgage rate crossing into 6% territory in September 2022, and we haven’t been below 6% since then. In the graph below, you can see the big decline in inventory of homes for sale that started in the 3rd quarter of 2022.
The inventory of homes sold is also at an all time low, again due to high interest rates and the high price of homes. According to Bankrate.com, home buyers currently need to earn a six figure income in order to buy the median priced home in 22 states (including Utah) and Washington DC, up from 6 states and DC in 2020.
In the graph below you can see that as soon as interest rates started increasing in January 2022, the number of buyers started falling off from the levels of previous years. The first half of 2022 was also the peak of the median price of a single family home in Salt Lake County when it reached a median price of $637,000 at the end of the 2nd quarter.
Residential Building Permits on the Decline
There are a couple other factors worth noting. The number of residential building permits issued in Utah in 2023 was down again from the previous year. If you look at the last four years, there were 31,401 permits issued in 2020, 39,620 issued in 2021, 29,386 issued in 2022 and 24,596 issued in 2023. It’s easy to understand why builders are holding back, with high interest rates and decreased buyer demand due to affordability.
Another factor is population growth. The population growth in Utah from July 2022 to July 2023 was 55,989 total growth with a net-in migration of 31,558. This is down 8.6% overall and down 17.2% for net-in migration from the previous 12 months from July 2021 to July 2002 when our total population grew by record numbers with a total growth of 61,242 people, and net-in migration at 38,141, which was 62% of the total growth.
Population growth may be down, but it’s still pretty high and there is still a housing shortage in Utah which is estimated at 37,000 units in 2024, by the Kem C. Gardner Policy Institute at the U of U.
Interest Rates and the Market Outlook
The Federal Reserve is still forecasting three 1/4% interest rate drops to their Benchmark Federal Funds rate for 2024, but we’ll see if inflation falls enough for that to happen.
I don’t think most of us thought interest rates would be this high for this long, but inflation has proven to be sticky at 3% and the Federal Reserve is sticking to their game plan.
There are a lot of “what-ifs”, and who knows what will actually happen, but my gut feeling is when the 30-year mortgage rate gets down to 6% or less, if that happens, the local residential real estate market will probably rally again due to everything that’s happening now with low inventory and decreased new construction.
If I was looking to buy a home or condo, or sell my existing home to buy a new home, I wouldn’t wait for lower interest rates to do that. The market is flat and somewhat manageable at this point.
If you enjoyed reading this newsletter, please share it with your friends, family and colleagues, and if you have any questions about buying or selling residential real estate in or around Salt Lake, wonder what your home is worth, or know someone who needs help buying or selling, please contact me.
Over 90% of the people that I help buy and sell homes, are repeat customers and referrals from the people I know. I love what I do, and I truly can’t do it without you!
Thank you!
Kev
