Thursday, October 12, 2023:
I’ve been hearing the term “uncharted territory” for quite a while now, due to the rapid increase of interest rates. The Federal Reserve hasn’t increased the Federal Funds Rate this fast since the early 1980’s, but the rate is much lower than it was in the early 80’s.
Right now Federal Funds rate is at 5.33%, back in 1980 & 1981 it was in the 10-20% range, but that was after the inflationary times of the 1970’s, where the average inflation rate was 6.8% for the decade. The Federal Reserve’s current long term inflation target, CPI, is 2%.
September CPI was released earlier today and came in up 0.4% for the month and 3.7% from a year ago, this is slightly higher than the forecast of 0.3% for the month and 3.6% from a year ago, so we probably won’t see a drop in interest rates any time soon.
After more than a 10 year bull run of property values in Utah with record low interest rates, the 30-year mortgage rate has climbed from 3% in December 2021 to 8% now. The increase in cost of principal and interest on a 30-year mortgage at 3% vs 8%, is 74%.
3rd Quarter 2023 Results for Residential Real Estate in Salt Lake County:
Single Family Homes in Salt Lake County:
The median sold price of a single family home in Salt Lake County was $605,000 for the 3rd quarter of 2023, a 0.8.% increase from $600,000 in the 3rd quarter of 2022, a 10% increase from $550,000 in the 3rd quarter 2021 and a 39.7% increase from $433,000 in the 3rd quarter of 2020.
The number of homes listed for sale has been on a three year slide, decreasing 31.7%, from 4,299 in the 3rd quarter of 2020 to 2,935 in the 3rd quarter of 2023. The number of homes sold has decreased 50.1%, from 4,227 in the 3rd quarter of 2020 to 2,109 in the 3rd quarter of 2023.
The number of building permits issued in Utah has also been on the decline since 2022. According to Jim Wood at the Gardner Institute, building permits issued for residential construction rose 26% in 2021, then fell 26% in 2022 and decreased by 37% from the 2nd quarter of 2022 to the 2nd quarter of 2023.
So fewer homes are being built, fewer homes are being listed for sale, fewer homes are being sold and home values have flattened out. RIght now there is 60 days of single family home inventory in Salt Lake County, when you compare the number of homes listed for sale to homes under contract, which is about the same as last year at this time when there were 56 days of inventory.
Condos & Townhomes in Salt Lake County:
The median sold price of a condo/townhouse in Salt Lake County was $415,000 for the 3rd quarter of 2023, which is exactly what it was in the 3rd quarter of 2022.
We are also seeing the same trend with condos and townhomes listed for sale and sold, as we are seeing with single family homes. Since 2020, the number of condos and townhomes listed for sale has decrease by 33.9%, from 1,778 in the 3rd quarter of 2020 to 1,175 in the 3rd quarter of 2023, and the number sold has fallen 45.7%, from 1,607 in the 3rd quarter of 2020 to 873 in the 3rd quarter of 2023.
From looking at the 3rd quarter numbers and trends, I think there are a lot of people who would like to buy a home if they could and are watching and waiting for prices and/or interest rates to come down so they can afford it. Hopefully that happens in the next year or two, but it doesn’t look like it will happen in the next couple months with September CPI at 3.7% and the Fed’s target for CPI at 2.0%.
As the population of Utah and the Wasatch front continues to grow, and the number of homes and condos being built and sold decline, there has to be pent-up home buyer demand building up.
When you look at the foot print of the Wasatch Front, it has mountains and lakes on both sides of the valley. On the east side, there is almost no vacant land left to build on. On the west side we are seeing land used more efficiently with townhomes and single family homes being built on smaller lots, and condos and apartments being built with multiple stories.
Nobody knows for sure, and everyone should decide what is right for them, but as long as inventory doesn’t start to increase dramatically, which so far it hasn’t, my gut feeling tells me this is a good time to buy a home in Salt Lake County, as long as you can really afford the payment and plan on staying in your home for at least 3 to 5 years.
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 that needs help buying or selling, please contact me. Over 90% of the people I help are repeat customers and referrals from the people I know. I love what I do, and I can’t do it without you!