It feels like we’ve been experiencing the winds of change, and they have been blowing hard. We started out 2022 with the number of homes for sale in Salt Lake County at record lows, home prices at record highs and interest rates around 3% for a 30-year mortgage. Home buyers were in a frenzy to get into a home while interest rates were still low and there were multiple offer situations with 20+ offers on some homes.
The 2nd quarter of 2022 was a transitional quarter. I could start to feel the change in April, as interest rates increased further and fewer offers were made on homes. At the same time the stock market was declining significantly and inflation put its roots down deeper with the price of gas sky rocketing.
As buyer demand cooled off, price reductions started to become more common. According to Redfin, 45.8% of the homes listed for sale in Salt Lake City had a price reduction in May 2022, compared to 20% in May 2021, and the rest of the Wasatch Front is experiencing the same thing with Ogden, Provo and Salt Lake City all in the top 6 metro markets nationwide for price reductions in May 2022.
During this time the number of homes for sale in Salt Lake County has increased significantly, from a record low of 230 homes for sale on February 1, 2022 to 1,653 homes for sale on July 11, 2022.
The increase in the number of homes for sale may seem shocking, but I’m looking at this change as a good thing, and it’s still technically a Seller’s Market. Inventory levels for single family homes in Salt Lake County were at less than a week in February and March 2022, and now they are at six weeks. For the market to be considered a buyer’s market, inventory needs to be at least three months.
And, prices still increased in the second quarter.
2nd Quarter Median Price Change in Salt Lake County:
The median price of a single-family home in Salt Lake County increased from $535,000 to $637,000 from the 2nd quarter of 2021 to the 2nd quarter of 2022, a 19.6% increase. Last year that number was 27.2%.
The median price increased from $603,000 in the 1st quarter of 2022 to $637,000 in the 2nd quarter of 2022, a 5.6% increase. Last year that number was 12.6%.
If you look at the graph above, you’ll see that the number of homes listed for sale (green line) is up from 4,003 in the 2nd quarter of 2021 to 4,317 in the second quarter of 2022 and the number of homes sold (black line) is down from 3,338 to 2,819. That’s a net increase of 833 homes for sale over 2nd quarter 2021, meaning buyer demand has decreased in 2022.
Then look further back to the 2nd quarter of 2019 when 5,408 homes were listed for sale and 3,791 were sold and compare that to the 2nd quarter of 2022 with 4,317 listed and 2,819 under contract. That’s 1,091 fewer homes listed for sale and 972 fewer homes sold in 2022 compared to 2019.
Now consider the median price and the 30-year mortgage rate. In the 2nd quarter of 2019 a single family home was $385,000 and a 30-year mortgage was 3.8%, today that house is $637,000 and the rate is 5.3%.
The principal and interest with a 20% down payment on that $385,000 home in 2019 was $1,435 per month. Today that home would cost you $2,830 per month, a 97% increase. This explains the decrease in the number of homes under contract. Household income hasn’t kept up with the increased cost of housing.
The median price of a condo/townhouse in Salt Lake County increased from $368,000 to $450,000 from the 2nd quarter of 2021 to the 2nd quarter of 2022, a 22.3% increase. Last year that number was 27.8%.
The median price increased from $435,000 in the 1st quarter of 2022 to $450,000 in the 2nd quarter of 2022, a 3.4% increase. Last year that number was 9.9%.
The graph below is from the Freddie Mac web site and shows the average interest rate from 1971 to 2022 for the 30-year fixed rate mortgage, the 15-year fixed rate and the 5/1-year Adjustable rate.
It kind of puts things in perspective when you look at this graph. The 30-year mortgage rate has been at an average of 8% since 1971. Yes, the 30-year rate has gone from 3% to 5.3% in the last six months, but that’s still a great rate.
In the meantime, housing inventory is increasing, we’re seeing more price reductions on those homes, buyer demand has decreased and multiple offers are much less common with fewer competing offers when they do happen.
If you’ve been a buyer standing on the sidelines, maybe it’s time to get into the game, and if you own a home that you need to sell in order to buy, the possibility of a seller considering your contingency to sell is much more likely than it has been over the last two years.
If you or someone you know has any questions about buying or selling real estate or if you’re wondering what your home is worth, I’d love to hear from you!
Thank you for your repeat business and your referrals, without you I’m just reporting the real estate news! 😊