Matthew Gardner • August 3, 2023

Q2 2023 Utah Real Estate Market Update

by Gary Peterson

The following analysis of select counties of the Utah real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.

Regional Economic Overview

Although it slowed in the first quarter of 2023, employment growth has stabilized in Utah. The state added 52,400 jobs over the past 12 months, which represents an annual growth rate of 3.1%. The counties covered by this report added almost 33,000 new jobs over the past year, representing a growth rate of 2.4%. As we saw in the first quarter of the year, the fastest growing county was Summit, which had a 5.8% annual growth rate. The slowest was again Morgan County, where the job level rose 1.6%. Utah’s unemployment rate in May was 2.5%, up .03% from the level in the second quarter of 2022. At the county level, the lowest jobless rate was in Morgan County (1.8%) and the highest was in Weber County, where 2.5% of the workforce was without a job. In aggregate, the unemployment rate within the counties contained in this report was only 2.3%.

Utah Home Sales

❱ In the second quarter, 6,939 homes were sold in the areas covered by this report. This was down 21% compared to the second quarter of 2022 but was 28.3% higher than in the first quarter of this year.

❱ Year over year, sales fell across the board. However, sales increased by double digits in every county covered by this report compared to the first quarter.

❱ It is quite likely that the higher number of homes sold compared to the previous quarter was a result of the impressive increase in the number of homes for sale. Inventory rose 12.6% over the first quarter.

❱ Pending sales rose 14.6% from the first quarter, suggesting that closings in the upcoming quarter will likely rise.

A graph showing the annual change in home sales by county for Utah from Q2 2022 to Q2 2023. Weber had the least drastic change at -16.5%, while Morgan had the largest change at -40.5%. Counties like Utah and Salt Lake were in the middle at around -20%.

Utah Home Prices

❱ The average sale price in the quarter fell 5.4% from the second quarter of 2022 to $629,289. However, sale prices were 4.1% higher than in the first quarter of 2023.

❱ Median list prices in the second quarter were 8.5% higher than in the first quarter of the year. It’s interesting to see sellers’ continued confidence given the significant increase in mortgage rates the market has experienced.

❱ Year over year, prices rose in Summit County but dropped in the other markets. Compared to the first quarter, prices rose in every county other than Wasatch, where they fell 12.7%.

❱ It was notable that the markets that saw list prices rising were in the more affordable areas. Expensive counties, such as Morgan, Summit, and Wasatch, all had lower median list prices than in the first quarter of this year.

A map showing the real estate home prices percentage changes for various counties in Utah. Different colors correspond to different tiers of percentage change. Morgan had a percentage change in the -17% to -12.6% range. Weber, Davis, Salty Lake, and Utah were in the -8% to -3.6% change range. Wasatch was in the -3.5% to 0.9% change range. Summit was in the 1%+ change range.

A bar graph showing the annual change in home sale prices by county in Utah from Q2 2022 to Q2 2023. Summit County tops the list at 10%, while Morgan County had the greatest decline at -16.8%. Salt Lake and Utah Counties were toward the middle at around -6%.

Mortgage Rates

Although they were less erratic than the first quarter, mortgage rates unfortunately trended higher and ended the quarter above 7%. This was due to the short debt ceiling impasse, as well as several economic datasets that suggested the U.S. economy was not slowing at the speed required by the Federal Reserve.

While the June employment report showed fewer jobs created than earlier in the year, as well as downward revisions to prior gains, inflation has not sufficiently slowed. Until it does, rates cannot start to trend consistently lower. With the economy not slowing as fast as expected, I have adjusted my forecast: Rates will hold at current levels in third quarter and then start to trend lower through the fall. Although there are sure to be occasional spikes, my model now shows the 30-year fixed rate breaking below 6% next spring.

A bar graph showing the mortgage rates from Q2 2021 to the present, as well as Matthew Gardner's forecasted mortgage rates through Q2 2024. After the 6.79% figure in Q4 2022, 6.35% in Q1 2023, and 6.51% in Q2 2023, he forecasts mortgage rates going to 6.55% in Q3 2023, 6.31% in Q4 2023, 6.03% in Q1 2024, and 5.72% in Q2 2024.

Utah Days on Market

❱ The average time it took to sell a home in the counties covered by this report rose 36 days compared to the same period a year ago.

❱ Homes sold fastest in Salt Lake County and slowest in Summit County. All areas saw average market time rise compared to the second quarter of 2022, but market time fell in all areas compared to the first quarter of this year.

❱ During the second quarter, it took an average of 54 days to sell a home. Market time fell 13 days compared to the first quarter of 2023.

❱ It was impressive to see the length of time it took to sell a home in the region fall significantly despite more inventory and higher financing costs.

A bar graph showing the days on market by county for homes in Utah in Q2 2023. Salt Lake County had the lowest DOM at 37, while Summit had the highest at 78. Utah and Wasatch Counties were in the middle at around 50 days on market.

Conclusions

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

In the first quarter Gardner Report, I suggested that the region was “very close to bottoming out” in respect to price. It appears I underestimated the resilience of Utah’s housing market. Given all the data presented here, the only thing that favors buyers is that there are more homes for sale. That said, while inventory levels have risen, they remain remarkably low by historic standards. This doesn’t come as a surprise given that 87.6% of all homeowners with a mortgage have rates below 5% and 31.6% have rates at or below 3%. If they don’t have to sell, why would they?

A speedometer graph indicating a balanced market bordering on a seller's market in Utah for Q2 2023.

This will keep inventory tight. The only question that remains is how long the market can tolerate high mortgage rates and decreasing affordability. Given all the above factors, I have moved the needle a little more in favor of sellers. I can’t go so far as to suggest that sellers are in a totally dominant position, but they still have the upper hand.

About Matthew Gardner

Matthew Gardner - Chief Economist for Windermere Real Estate

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.

Market Updates • Matthew Gardner • July 24, 2023

Housing Market 2023: Home Prices, U.S. Demographics, and More

by Gary Peterson

Harvard University’s latest edition of “The State of the Nation’s Housing” has arrived, and Windermere Chief Economist Matthew Gardner is here to break down what the data presented in the report means for the U.S. housing market in 2023 and beyond.

This video is the latest in our Monday with Matthew series with Windermere Chief Economist Matthew Gardner. Each month, he analyzes the most up-to-date U.S. housing data to keep you well-informed about what’s going on in the real estate market.

Housing Market 2023

Hello there, I’m Windermere Real Estate’s Chief Economist Matthew Gardner, and welcome to this month’s episode of Monday with Matthew. I spend a lot of time reading reports that relate to the housing market, but there is one in particular I’m always impatiently waiting for, and it’s published by my colleagues at the Joint Center for Housing Studies at Harvard University. Every year they release the The State of the Nation’s Housing report and it’s packed full of fascinating data about the ownership and rental housing markets, demographics, and it also discusses the challenges that lay ahead. So today, I wanted to touch briefly on just a few of the report’s high points, but I highly recommend you download it from their website.

What’s happening in the housing market?

A double line graph showing home price and apartment rent growth from 2004 to 2023. The year-over-year changes were stable between 2011 and 2020, rising to roughly 20% YOY by 2022 and have declined sharply during the past year. Housing market 2023.

As we all know, the for-sale housing market started softening in mid 2022 in response to rising interest rates and deteriorating affordability. What was particularly notable was that seasonally adjusted home prices fell month over month last July and that was the first monthly drop in over a decade. And over in the rental market, asking rents—while still up year over year—also saw their pace of growth slow considerably, and that is a concern.

Is home construction slowing down?

A line chart showing the number of single-family homes under construction from 1970 to 2022. After a steady increase from 2010 to 2022, single-family construction has dropped dramatically while multifamily development has remained strong. Housing market 2023.

As you see here, multifamily construction continued to rise last year even as rental demand was softening. In fact, 547,000 new multifamily units were started in 2022, the highest number since the mid-1980s, and the 960,000 units under construction in March 2023 was the highest number seen in half a century. On the ownership side, it wasn’t surprising to see single-family construction falling significantly as buyers reacted to sharply higher borrowing costs.

The report also suggested that the decline in new construction was particularly acute for lower-priced homes. Builders just can’t produce entry-level product with current material, labor, and land costs; limited lot availability; and regulatory barriers such as minimum lot sizes that restrict production of entry-level housing production.

U.S. Population Demographics

A bar graph showing the annual population change in millions from 2011 to 2022. Both the natural population change and net immagration steadily decreased from 2014 to 2021 before rebounding slightly in 2022.

Now turning to demographics. Population growth—naturally the primary long-term driver of household growth—remains historically low. Overall, the U.S. population grew by 1.26 million people last year, or just 0.38%. Now, while this does represent a slight uptick from previous years that’s really not saying much as U.S. population growth hit 100-year lows in 2019, 2020, and 2021.

Increases in a country’s population come in two ways. The first is “natural” growth—which equals the number of persons born minus the number that have died—and the second is via immigration. Now, gains from immigration can be fickle because they are subject to unpredictable government policy changes as well as economic cycles here in the U.S. as well as in other countries. But natural growth is more predictable because it is driven by slow-moving factors like birth and mortality rates. Until last year, natural growth had been the primary source of population growth in the U.S., but, as you saw in that last chart, things have shifted.

U.S. Population Growth & Migration

A map of the United States showing the counties with the greatest natural growth. There are many in Southern California, a few in western Washington Stage, a cluster in east Texas, and various counties spread throughout the Midwest and East Coast.

This map shows counties with the highest level of natural growth and it’s dominated by large metro markets in California, Texas, Southern Florida and parts of the Northwest. But, what I found very interesting was that the numbers were remarkably low. Only six counties—three in California, two in Texas, and one in New York—saw natural growth above the 10,000 level and 75% of counties across the country saw negative natural growth.

A map of the United States showing the counties with the greatest domestic migration. There are many in Florida and other states along the East Coast. There are several clusters throughout the Mountain West as well as a handful in East Texas.

So with natural growth slowing, states will understand the importance of attracting new residents from other markets as domestic migration will become a more important driver of household growth and housing demand. Here you see that Maricopa County, AZ saw the largest gains from domestic migration but, statewide, Florida dominated last year with 319,000 people moving there. Texas came in second with a net gain of over 230,000 people. But on the other end of the spectrum, California was the biggest loser with net 343,000 people leaving, followed by New York who lost 300,000 residents.

A map of the United States showing the counties with the greatest international migration. There are several counties represented in western Washington State, southern California, southwestern Arizona, and south Florida. There are a few dozen counties scattered throughout the Northeast.

It was international migration that accounted for a full 80% of total growth last year and it was the largest source of total population growth for 26 states and 29% of all counties across the country. The biggest winners were LA County in California, Miami-Dade County in Florida, and Harris County, Texas.

These were just some of the highlights of the report and the biggest conclusions I found were that, in the ownership market, supply will remain tight in the resale arena and new construction will not fill that void, especially as it comes to the entry level product. Housing affordability will not improve. This will continue to be a big issue across the country.

An oversupply of apartments coming online will further moderate rents, but renters will also find affordability to be a big concern. Demographic trends suggest that low domestic population growth going forward will lower new household formations and it’s quite likely that population and household growth will start to rely wholly on immigration earlier than the government expects.

So, there you have it. As always, I’d love to hear your thoughts on this subject so feel free to leave your comments below. Until next month, stay safe out there and I’ll see you soon. Bye now.

To see the latest real estate market data for your area, visit our quarterly Market Updates page.

About Matthew Gardner

Market News • Matthew Gardner • June 29, 2023

2023 Top 10 Predictions | Mid-Year Update

by Gary Peterson

2023 Top 10 Predictions | Mid-Year Update

Windermere Chief Economist Matthew Gardner revisits his Top 10 Predictions for 2023. Reviewing his forecasts for home prices, mortgage rates, and more, he highlights recent changes in the real estate market and updates his predictions for the near future.

Top 10 Real Estate Market Predictions 2023 | Mid-Year Update

Hello there, I’m Windermere Real Estate’s Chief Economist Matthew Gardner and welcome to this month’s episode of Monday with Matthew. You may remember that at the end of last year, I published my Top-10 Predictions for 2023 and, as we hit the mid-year mark, some of you have been asking me how well my forecasts have been holding up. So, I thought it would be interesting to take another look at them to see how accurate they have or have not been! These were the predictions I made last November, and they covered everything from my expectations for home sales and prices to shifting government policies.

U.S. Home Sale Prices

A line graph showing the year-over-year U.S. home sale prices from May 2022 to April 2023. The YOY price change drops from 15% to below 0%, while the MOM price change oscillates between roughly 4% and -4.5%, bottoming out in July of 2022.

My first forecast suggested that sale prices would fall in 2023; however, I was not expecting any sort of systemic decline in values. Here you can see that year-over-year prices are down by a bit less than 2%, but when you look at how prices have changed month over month, they rose by 3.6% in April and are up by more than 6% since the end of last year.

I stand by my forecast that the median sale price in 2023 will be modestly lower than the 2022 number; and the monthly increase in sale prices that we have seen so far this year also supports my forecast that we are not seeing any long-term decline in home values.

2023 Mortgage Rates

A line graph showing the mortgage rates so far in 2023, peaking above 7% in late February and late May. Otherwise, they have remained between 6% and 7%.

Although mortgage rates have broken above 7% eight times so far this year—the first time because of the banking crisis, and the second because of the looming debt ceiling—I expect them to become a little less frantic as we move through the second half of the year. That said, my call for them to drop below 6% this year is now likely to be inaccurate given where they are today. I still expect them to drop into the “fives” though, but not until early next year.

Is housing inventory increasing?

A line graph showing the inventory of homes for sale in the U.S. from January 2020 to March 2023. In million, the number has gradually decreased from just above 1.5 to just above 1.0, bottoming out between January and March 2022 at below 1.0.

Listing activity saw a very modest late spring bump, but for perspective, the number of homes for sale is running at about 40% of its long-term average, and I still don’t see much growth this year. Why? Well, by my calculations, there could be over 20 million homeowners with mortgage rates around 3%. Why would they move!

Is 2023 a buyer’s or seller’s market?

A line graph showing the months of inventory for homes between 2017 and 2023, and whether that value corresponds to a seller's market, a balanced market, or a buyer's market. Most of the data points are in the seller's market range for these years, and Matthew Gardner predicts it is unlikely that we'll see a buyer's market in 2023.

And with limited inventory, the market still “technically” favors home sellers. Now, this is a little speculative because what defines a traditional “buyer’s” or “seller’s” market varies by location, but with relatively few homes on the market and the share of homes with price reductions dropping and list prices rising again, I just can’t see a buyer’s market appearing this year.

Are home prices falling?

A line graph showing U.S. median list prices for homes between January 2022 and April 2023. Prices were roughly $330,000 in January 2022, climbing to almost $400,000 during summer 2022, bottoming out at below $370,000 around January 2023, and returning to $390,000 by April 2023.

Well, this doesn’t look to be meeting my forecasts, does it! Sellers have been pretty bullish so far this year, but I would add that this is not true across the whole country. List prices are still down significantly in markets such as Hailey, Idaho; Jasper, Alabama; and Elko, Nevada, where list prices for single-family homes are down between 30 and 50% from their peak. So, I admit that the country has outperformed my forecast for list prices.

Return to Office Statistics 2023

A graph and table showing the number of U.S. employees subject to newly effective return-to-office mandates. May 2023 has the highest value at nearly 600,000 employees. Matthew Gardner predicts more employees will get clarity on these policies in 2023.

As I had expected, the pace of workers heading back to the office has not been very robust. In fact, the share of people in the office full time dropped to 42% in the second quarter of 2023, down from 49% in the first quarter, that according to The Flex Report. Meanwhile, the share of offices with hybrid work arrangements hit 30% in the quarter, up from 20% the previous quarter. But I still expect to see more workers heading back to their offices, albeit very reluctantly.

New Home Permits and Starts Have Fallen

A line graph showing the number (in thousands) of U.S. single-family new home starts from January 2021 to March 2023. The numbers have almost entirely stayed in the 800-1,200 range, peaking above 1,200 in March 2021 and certain points between November and March 2022. In March 2023, the number of starts sat at just above 800,000.

With new home permits down 21% year-over-year, and new home starts off by 28%, I think its accurate to say that activity in the new construction sector has slowed. Builders continue to be hit by high financing rates as well as high material prices.

Are U.S. home prices dropping?

A map graphic showing 2023 U.S. home sale prices relative to their 2022 highs for select cities. Johnstown, PA has the greatest difference at -39.1% and Duluth has the least at -19.6%. Overall, Matthew predicts that the markets where home prices rose the fastest in recent years will experience a downturn.

As we all know, not all markets are created equal, and this chart shows how far below their 2022 highs some of the country’s metro areas are. On the opposite end of the spectrum, there are some markets where prices have already exceeded the highs seen last year (see map below).

A map graphic showing 2023 U.S. home sale prices relative to their 2022 highs, specifically some markets where prices have already exceeded the highs seen last year: Pueblo, El Paso, Hilo, and others.

Housing Affordability 2023

A line graph showing a homeownership affordability index from January 2020 to March 2023. The affordability line sits at 100. From January 2020 to May 2021, the trend line was above 100. It consistently dipped after that until January 2023, sitting just below 80.

Affordability has not improved, mainly due to home prices that remain out of sync with incomes as well as financing costs that remain well above the level that buyers had become used to. I still believe that this will not improve in 2023.

A power point slide showing recent changes in support of zoning changes including House Bill 1110, The New York Housing Compact, Florida SB-88, and the Make Virginia Home Plan.

And finally, I told you that governments would start to move to address the significant housing shortage that the country is experiencing, and they have. As you can see, in Washington State, Governor Inslee recently signed House Bill 1110 into law which allows the development of duplex up to six-unit buildings within any area zoned for single-family-only development. Additionally, jurisdictions in a significant number of states are either pursuing legislation to tackle this problem or have at least created task forces to look at the issue. It’s a good start, but more needs to be done.

Although it’s really cheating to grade one’s own work, I think that I have been pretty accurate with my forecasts. Yes, I was too pessimistic when it came to list prices and a little optimistic regarding the direction of mortgage rates. But other than those two items, the data seems to suggest that the housing market is headed in the direction that I had suggested.

What do you think? I’d love to hear your thoughts on this subject so leave your comments below. As always, stay safe out there and I’ll see you all next month. Bye now.

To see the latest real estate market data for your area, visit our quarterly Market Updates page.

About Matthew Gardner

Selling • June 12, 2023

Selling Your Home: 5 Common Myths

by Gary Peterson

A heterosexual Black couple discussing the terms of a real estate transaction in their dining room with their real estate agent as they work together to sell their home. The couple’s child sits next to them doing homework.

Selling your home is a crash course in real estate education. You’ll learn how to work with your real estate agent to find a buyer and sell at the right price. As you prepare to sell, it’s important to remember that that not everything you’ve heard is true. There are several common myths that can lead to costly mistakes in the selling process. Knowing the truth behind them will clarify your selling journey and help you align your expectations.

Selling Your Home: 5 Common Myths

1. Home Value Calculators Are 100% Accurate

Online Automated Valuation Models (AVMs) are a great starting point for understanding how much your home could be worth. However, they are merely a first step in determining home value; to say they are 100% accurate is a myth. When it comes to pricing your home, you need to rely on your real estate agent’s Comparative Market Analysis (CMA), which uses vast amounts of historical and current data on real estate listings to arrive at an accurate and competitive figure.

2. Selling FSBO Will Save You Money

Selling a home requires an intimate knowledge of the housing industry and how to solve the complex situations that arise throughout a real estate transaction. Despite this, some sellers will go it alone and attempt to sell their property without being represented by an agent.

Selling For Sale by Owner (FSBO) is a risky proposition. It requires the seller to bear added liability, fills their schedule with various marketing and promotional responsibilities, and can leave money on the table by inaccurately pricing the property, causing it to sit on the market for too long. The potential costs of selling a home on your own far outweigh the commission real estate agents earn on a home sale.

3. You Must Remodel to Sell Your Home

The question you’ll face when preparing to sell your home is whether to sell as is or remodel. The answer usually lies somewhere in between, but it depends on your situation and what kinds of home upgrades are driving buyer interest locally. When making improvements to your home, lean toward high ROI remodeling projects to get the best bang for your buck, and avoid trendy projects that can delay listing your home. If you’re considering major upscale renovations, talk to your agent about which projects buyers in your area are looking for.

A Caucasian heterosexual couple are discussing a home remodeling project with a Latin American contractor as they prepare to sell their home. They look over paperwork on a wooden dining room table.

Image Source: Getty Images – Image Credit: andresr

4. Never Accept the First Offer

You’ve likely heard tell that the first buyer’s offer is nothing more than a springboard to up your asking price and to never accept it. In this case, “never” should be approached with caution. In reality, the best offer for your home is one that you and your agent have discussed that aligns with your goals. If a matching offer happens to be the first one that comes your way, so be it. The market can shift at any time, so you never know what may happen if you leave an offer on the table. And if the buyer backs out of the deal, you and your agent will find a path forward.

5. Home Staging Doesn’t Make a Big Difference

Staging your home is so much more than a cosmetic touchup; it has been proven to help sell homes faster and at a higher price than non-staged homes.¹Staging ensures that your home has universal appeal, which attracts the widest possible pool of potential buyers. When buyers are able to easily imagine living in your home, they become more connected to the property. You should stage your home regardless of your local market conditions, but it can be especially helpful in competitive markets with limited inventory where even the slightest edge can make all the difference for sellers.

Market Updates • Matthew Gardner • May 30, 2023

Would the FHFA Mortgage Fee Changes Have Favored Buyers with Low Credit Scores?

by Gary Peterson

The Federal Housing Finance Authority recently put a hold on raising upfront mortgage fees given pushback that suggested home buyers with good credit were being penalized. Windermere Chief Economist Matthew Gardner looks at Loan Level Price Adjustments (LLPAs) to explain why some headlines were misleading.

This video on the proposed FHFA mortgage fee changes is the latest in our Monday with Matthew series with Windermere Chief Economist Matthew Gardner. Each month, he analyzes the most up-to-date U.S. housing data to keep you well-informed about what’s going on in the real estate market.

FHFA Mortgage Fee Changes

Hello there, I’m Windermere Real Estate’s Chief Economist Matthew Gardner, and welcome to this month’s episode of Monday with Matthew. As most of you are aware, the Federal Housing Finance Authority announced that they were going to raise the upfront fees for mortgages backed by Fannie Mae and Freddie Mac, and that led to significant backlash from some suggesting that borrowers with good credit would now be paying more than borrowers with bad credit.

And as these voices grew louder, Congress stepped in with House Financial Services Committee Chair Patrick McHenry and Housing and Insurance subcommittee Chair Warren Davidson announcing a plan to repeal these fee increases if they were introduced. Well, this did not go unnoticed, and the FHFA announced on May 10^th that they were putting a hold on a new fee structure in order to engage industry stakeholders and better understand their concerns.

So, for now nothing has changed, but I still think it’s a subject worth discussing because we will see another proposal from the FHFA at some point in the future. So, what’s going on?

Well, periodically the FHFA raises the upfront fees that the Agencies charge borrowers for the purchase and refinance of mortgages that they guarantee, and these fees are called Loan Level Price Adjustments, or LLPAs.

In April of 2022, these fees went up for several types of loans including ones in expensive markets that have a higher conforming loan limit than seen nationally, and they also raised fees on second home mortgages. But to support affordable housing, the lower rates for certain programs including HomeReady, Home Possible, and HFA Advantage weren’t increased. And they didn’t raise fees for loans to first-time home buyers in high-cost areas if they earned at or below the area median income.

And the new round of fee increases that was scheduled to start in May of this year has many believing that it was just another subsidy given to households with lower credit that’s being paid for by households with better credit. But is that really an accurate statement? I don’t necessarily think so.

First off, the FHFA had to increase fees this year simply because they needed the money to cover higher capital requirements that went into effect last year, but that’s a topic for another day. For now, let’s take a look at the changes that would have been made.

Changes to LLPAs

A matrix chart showing the differences between the mortgage fee loan level price adjustments that were in place and the FHFA's proposed mortgage fee increases for credit scores ranging from 639 and 780. The matrix chart shows that seemingly, the changes do benefit those with lower credit scores. However, that is misleading.

The matrix you see here shows you the difference between the fee that was in place and the one that was proposed. Remember, this is not the actual fee itself, but the spread between the old and new pricing. And, as you can see, on face value it really does look to benefit borrowers with lower credit scores and penalize households with better credit. For example…

Changes to LLPAs: Credit Score 640 – 659

A matrix chart showing the differences between the mortgage fee loan level price adjustments that were in place and the FHFA's proposed mortgage fee increases for credit scores ranging from 639 and 780. The matrix chart shows that a household with a credit score of between 640 and 659 would see savings across all loan-to-value ranges.

A household with a credit score of between 640 and 659 would see savings across all loan-to-value ranges versus the following:

Changes to LLPAs: Credit Score 740 – 759

A matrix chart showing the differences between the mortgage fee loan level price adjustments that were in place and the FHFA's proposed mortgage fee increases for credit scores ranging from 639 and 780. The matrix chart shows that a household with a credit rating of 740 to 759 would be paying the same or more in most scenarios with fees increasing between 0.125% and three quarters of a percent.

A household with a credit rating of 740 to 759 who would be paying the same or more in all bar two scenarios with fees increasing between 0.125% and three quarters of a percent.

But is this really something to be worried about?

There are two things that stand out to me. The first is that a household putting down less than 20% has to buy private mortgage insurance. So, in reality, these households are actually less of a risk to the agencies than those who don’t, so isn’t it right that they should pay less in fees? Secondly, although I can’t disagree with anyone who states that families with lower credit will see fees go down and, generally speaking, they will go up for those with better credit, but people are confusing the CHANGE in the fee with the ACTUAL fee itself.

What I am saying is that low credit borrowers aren’t paying less than high credit borrowers. It’s just the spread in the rates between households with lower credit and those with higher credit has simply gotten smaller.

There is absolutely no scenario where someone with lower credit gets a lower fee. Let me show you.

Loan Level Pricing as of March 1, 2023

This was the new pricing schedule had it actually come into effect. Now let’s say there are two households wanting to buy houses for $500,000 and both looking to borrow 80% of the purchase price.

One buyer has a credit score of 640, so their LLPA would be 2.25% of the loan amount, or $9,000. The other buyer had a credit score of 740 so their fee would be 0.875%. That means the household with higher credit would be paying $5,500 less than the household with lower credit on a $400k loan.

No one is arguing that households with lower credit scores would have paid less in upfront fees, but I actually don’t see a problem with that. Remember, Fannie and Freddie’s mission is, in part, to facilitate access to affordable housing. Moreover, these fees don’t even apply to non-conforming or jumbo loans and they don’t impact FHA or VA loans either.

Although I certainly don’t know where the FHFA will end up regarding fee changes, they will have to do something at some point. I just hope that any modified plan is presented in a way that fully describes the situation and isn’t one that’s able to be interpreted in a manner which allows for headlines that don’t describe the full picture.

As always, I’d love to hear your thoughts on this subject but, in the meantime, stay safe out there and I’ll see you all next month. Bye now.

To see the latest housing data for your area, visit our quarterly Market Updates page.

About Matthew Gardner

Design • May 15, 2023

How Much Paint Do I Need? Indoor Paint Calculator

by Gary Peterson

A young Caucasian woman with light hair sits on the floor of her living room as she prepares to paint the walls. She is one her phone, looking up how much paint to use.

Whether you’ve just bought a house or you’ve lived in your home sweet home for years, at some point its walls and surfaces will be due for a fresh coat of paint. Repainting can breathe new life into an interior and help you personalize the space, whether you’re working within the latest interior design trends or blazing your own trail. But there’s one fundamental question facing every homeowner as they begin their painting project: How much paint do I need?

How much paint do I need?

Every project has a budget, and with the right planning you can execute the project to its full potential without going over budget. Painting is the ultimate DIY project and can be quite therapeutic, but still requires some calculation to determine how much you should expect to spend. With the right amount of paint, you’ll avoid overspending and getting saddled with the sunk cost of unused paint after you’ve completed your project.

The amount of paint required varies by project, but as a general rule of thumb, one gallon of paint covers about 400 square feet. So, it only takes a few simple measurements to calculate the amount of paint you’ll need for your walls.

How to Calculate How Much Paint You Need:

Start by measuring the length of each wall
Multiply the wall length by the wall height
Total length x total height = total square footage
Total square footage ÷ 400 = number of gallons
Subtract windows and doors square footage

Following this formula will give you the number of gallons you need to purchase for one coat of paint. Depending on your color scheme and the texture of your walls, your painting project may require multiple coats to have it looking just right.

If the walls you’re painting have windows and/or doors, simply perform the same basic calculation to determine their square footage and subtract that number from the total square footage value before calculating how many gallons you’ll need. When painting your ceilings, remember to account for the square footage of any skylights you may have in your home.

A middle-aged Caucasian man with dark hair paints bedroom walls sky blue. He wears painting overalls and uses a long-handled roller to apply the blue paint from the baseboard to the trim bordering the ceiling.

Image Source: Getty Images – Image Credit: aydinmutlu

Primer and Trim

It’s often the case that a paint job is only as good as its base coat. A solid layer of primer can really make your painting project shine. But the same query with your topcoat applies to your primer: how much do you need? A gallon of primer will cover up to 300 square feet, so you’ll need more primer than topcoat for your project. Perform the same calculations as above and divide your paintable square footage by 300 to determine how many gallons of primer you’ll need to pick up.

How to Calculate How Much Primer You Need:

Start by measuring the length of each wall
Multiply the wall length by the wall height
Total length x total height = total square footage
Total square footage ÷ 300 = number of gallons
Subtract windows and doors square footage

Calculating square footage for trim isn’t as straightforward as it is for a square or rectangular wall. When preparing to paint your baseboards and crown molding throughout your home, think in quarts rather than gallons. Trim paint may go on smoother depending on the wood finish, and you’ll be using a brush rather than a roller. If you end up with extra trim paint at the completion of your project, it never hurts to keep it around for future touchups.

Market News • Matthew Gardner • May 5, 2023

Q1 2023 Utah Real Estate Market Update

by Gary Peterson

Regional Economic Overview

Continuing the trend that started last summer, employment growth in Utah continues to taper. Over the past 12 months, the state added 52,600 jobs. At an annual rate of 3.2%, this was the slowest percentage growth since Utah started recovering jobs post-COVID. Although this is an improvement over the rate in the last quarter, annual adjustments to the data gave early 2023 data a boost. The counties covered by this report added more than 38,600 new jobs over the past year, representing a growth rate of 2.8%. The fastest growing county was Summit, with a 4.8% increase in employment. The slowest was Morgan County, where the job level rose .7%. Utah’s unemployment rate in February was 2.4%, matching the level at the end of 2022. The labor force continues to grow but, so far, it has not caused the jobless rate to rise, which is very impressive.

Utah Home Sales

❱ In the first quarter of the year, 5,251 homes sold. This was down 21% compared to the first quarter of 2022. Sales were .2% higher than in the fourth quarter of last year.

❱ Year over year, sales fell across the board. Compared to the fourth quarter, sales rose in Utah and Weber counties but fell in the rest of the market areas covered by this report.

❱ The number of homes for sale plummeted by one third when compared to the fourth quarter of 2022, making any increase in sales rather impressive.

❱ Pending sales jumped 38.3% from the fourth quarter, suggesting that closings in the second quarter of this year may rise further.

A bar graph showing the annual change in home sales for various counties in Utah from Q1 2022 to Q1 2023. All counties have a negative percentage year-over-year change. Here are the totals: Davis at -10.3%, Weber at -18.2%, Utah -21.7%, Salt Lake -22.4%, Summit -32.2%, Wasatch -35.8%, and Morgan -42.1%.

Utah Home Prices

❱ The average sale price in the first quarter of the year fell 5.3% compared to the first quarter of 2022 to $603,340. Prices were also .1% lower than in the fourth quarter of 2022.

❱ Median listing prices in the first quarter were 3.7% higher than at the end of last year, suggesting that home sellers remain confident about the spring market. Of the counties covered by this report, only Wasatch and Morgan counties saw listing prices fall compared to the prior quarter.

❱ Year over year, prices rose in Wasatch County but fell in the other markets. Compared to the fourth quarter of 2022, prices rose in Morgan, Summit, and Wasatch counties.

❱ The market is correcting. Although this may not be something sellers want to see, it is important to return to some sense of normalcy following the frantic, low-mortgage-rate-induced market of the pandemic period. There will be a relatively modest decline in prices in the coming months, but I expect home values to rise again in the second half of this year.

A bar graph showing the annual change in home sale prices for various counties in Utah from Q1 2022 to Q1 2023. Wasatch is at 20.7%, Weber -3.5%, Utah -3.8%, Salt Lake -4.3%, Summit -4.4%, Morgan -5.3%, and Davis -6.4%.

Mortgage Rates

Rates in the first quarter of 2023 were far less volatile than last year, even with the brief but significant impact of early March’s banking crisis. It appears that buyers are jumping in when rates dip, which was the case in mid-January and again in early February.

Even with the March Consumer Price Index report showing inflation slowing, I still expect the Federal Reserve to raise short-term rates one more time following their May meeting before pausing rate increases. This should be the catalyst that allows mortgage rates to start trending lower at a more consistent pace than we have seen so far this year. My current forecast is that rates will continue to move lower with occasional spikes, and that they will hold below 6% in the second half of this year.

A bar graph showing the mortgage rates from Q1 2021 to the present, as well as Matthew Gardner's forecasted mortgage rates through Q1 2024. After the 6.79% figure in Q4 2022 and 6.37% in Q1 2023, he forecasts mortgage rates dipping to 6.26% in Q2 2023, 5.78% in Q3 2023, 5.43% in Q4 2023, and 5.28% in Q1 2024.

Utah Days on Market

❱ The average time it took to sell a home in the counties covered by this report rose 42 days compared to the same period in 2022.

❱ Homes again sold fastest in Salt Lake County and slowest in Summit County. All areas saw average market time rise compared to the prior quarter as well as the same quarter in 2022.

❱ During the quarter, it took an average of 67 days to sell a home, which was an increase of 9 days compared to the final quarter of 2022.

❱ Although average market time rose compared to the fourth quarter of last year, the increase was not significant. Lower inventory levels may lead to market time pulling back again as we get into the spring months, or at least levelling out.

A bar graph showing the average days on market for homes in various counties in Utah for Q1 2023. Salt Lake County has the lowest DOM at 60, followed by Davis at 63, Morgan and Utah at 64, Weber at 69, Wasatch at 72, and Summit at 77.

Conclusions

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

Higher financing costs and lower affordability rates are acting as headwinds in the housing market, which is offsetting the benefit that housing normally sees from a growing economy. I have stated previously that home prices in Utah would continue to moderate but that a major downward correction was unlikely. That prediction appears to have been accurate. I believe that the market is very close to bottoming out given low inventory levels, rising pending and closed sales, and higher listing prices—all of which benefit home sellers. That said, lower home prices and longer days on market tend to favor home buyers.

A speedometer graph indicating a balanced market in Utah in Q1 2023, leaning toward a seller's market.

Ultimately, I would describe the market as balanced, but I am tilting the needle just a little in favor of sellers. I expect that mortgage rates will start to stabilize as we move through the spring and then start to drop a little. If this occurs and inventory levels do not rise significantly, then we will certainly be back in a position that more firmly favors home sellers.

About Matthew Gardner

Living • May 1, 2023

Managing Your Investment Property: DIY vs Hiring a Professional

by Gary Peterson

A young Caucasian man signs a rental contract with his landlord, a young Black woman, in the open kitchen area of a house. She holds a clipboard and keys as the tenant signs the paperwork.

Owning real estate is an efficient and productive addition to your investment portfolio. For an investment property that you don’t plan to live in, whether it’s your second home or you’ve done this a few times before, you’re faced with decisions about how to best use that investment for your goals.

Some investors will remodel their new property and sell it for a return. Others will use it for their vacation home, rent it to other vacationers, or both! But if your goal is to earn income over the long term from this property, you’re likely asking yourself, now what?

Renting to long-term tenants is a great strategy to build your wealth, but it is by no means a passive endeavor. From finding tenants, to managing the property, to finding new tenants again, you’ll need to weigh your options of taking on all the responsibilities or hiring a professional property manager. Managing your own rental takes time, money, and organization that can get in the way of life’s other responsibilities. Between accounting, adhering to local laws and regulations, property maintenance, and creating procedures for working with tenants, your plate will be full. If these responsibilities are too much to handle, the commission charged by a property management company may be a welcomed expense.

Your Local Landlord Tenant Laws and Regulations

The laws and regulations for rental properties differs across states, counties, and cities. Some locations are more regulated than others and whoever manages the property will need to be an expert in each.

If you decide to do it yourself, you’ll need to make sure you’re aware of the responsibilities and requirements for landlords in leasing, property maintenance, and payments. Check your local government’s website for more information and consider joining a local landlord association who provides support and updates for its members. To avoid getting into legal trouble, you’ll want to make sure your procedures are within the law, including how you tour and ask tenants to apply. It’s also recommended that you have a lawyer review your lease contract before accepting tenant applications.

Most professional property managers are aware and practiced in the local laws and regulations. They will also likely have a lease template that has been reviewed by lawyers, so they know it’s legal and enforceable. When talking with your local Windermere Property Management office, be sure to ask them about their processes for following the local laws, including their leasing procedures.

Investment Property: Managing the Money

Another important consideration is how you’ll manage the monies for your investment property. You’ll need to manage the security deposit, any fees you plan to charge, a way to take the monthly rent payment, and a savings account for property maintenance.

If you plan to manage the unit yourself, you’ll need to set up bank accounts in accordance with the local laws and keep track of the accounting for tax season. You’ll also want to make it easy for your tenants to pay rent. Check to see if your bank offers some form of ACH that you can set up or inquire about where tenants can send checks for deposit.

Professional management companies will have an accountant who manages the funds and tracks the income and expenses for property owners. You’ll likely set up a deposit and withdrawal agreement to make it easy to get your monthly check and pay any invoices. You can imagine the amount of time this saves!

When interviewing with a property manager, ask them where they hold deposits and their systems for rent payments. Oftentimes they’ll have software that makes it easy for tenants to pay online and track the monies they receive from tenants. Be sure to understand how you get paid as well and when you can expect those payments to be made each month.

A young heterosexual Hispanic couple shake hands with their property manager in the open kitchen area of their modern investment home. The kitchen has black cabinets and stainless-steel appliances. The ceiling is hardwood and there is a band of windows around the unit just below it.

Image Source: Getty Images – Image Credit: Hispanolistic

Moving In Tenants and Investment Property Maintenance

The beginning of a tenancy can set the tone for the rest of the lease. Build trust and respect with your tenants from day one; be upfront with your expectations for communication, especially about maintenance issues. It all starts with a move-in condition report.

A move-in condition report is a detailed document that notes the state of the property before the tenants have lived in it so that you can compare that to its condition when they move out. This helps you understand what damage, if any, is the tenant’s responsibility and what comes out of your pocket.

If you plan to manage the property yourself, you’ll want to find resources online or from your local landlord association about the best practices for move-in to make sure you don’t miss anything important as you inspect the exterior and interior of your rental property with the tenants.

Professional property managers have a wide range of services, which means even if you don’t hire one to handle every aspect of the rental, they may offer support with move-in. Their experience and knowledge will come in handy, along with their tried and tested procedures, leaving less to chance when the tenants move out.

Maintaining the property will differ for each investor depending on the condition of the home, the appliances, and your local laws that outline responsibilities for all parties involved. In some cases, you may never hear from a tenant about an issue or request, while other cases will require more hands-on work.

As a landlord, it’s a good practice to have a list of vendors you trust to handle common issues and emergencies. You also have the option to do the handiwork yourself if you are nearby and equipped to do so. Be sure your tenants know and understand how you’ll handle maintenance requests and work with them to schedule appointments.

Property managers usually already have a list of preferred vendors who they have worked with before. They will likely have someone at the ready for a wide range of issues which comes in handy, especially in the wake of large incidents that can book up the service providers in the area.

When interviewing professionals, be sure to ask them about their experience with moving tenants in, and their procedure and vendor list for maintenance requests. You’ll also want to know how they’ll communicate with you and manage payment for the invoices.

Which One Is Right For You?

After taking these factors into consideration, it’s up to you to determine what makes the most sense for your needs and lifestyle. If you feel comfortable managing your investment property and you know you have the time and ability to handle maintenance requests in a timely manner (especially emergencies), then being a landlord is right for you.

However, if you prefer to be more hands off and use the property for passive income with less effort on your part, hiring a professional for a commission might be worth it.

Market News • Matthew Gardner • April 25, 2023

Mortgage Rate Predictions and Misconceptions

by Gary Peterson

The Federal Reserve Bank of New York just released their 2023 Housing Survey, which shows how the U.S. population feels about the housing market. Windermere Chief Economist Matthew Gardner digs into the mortgage rate predictions, showing how demographics played a role in the results.

This video on mortgage rate predictions is the latest in our Monday with Matthew series with Windermere Chief Economist Matthew Gardner. Each month, he analyzes the most up-to-date U.S. housing data to keep you well-informed about what’s going on in the real estate market.

Mortgage Rate Predictions

Hello there! I’m Windermere Real Estate’s Chief Economist Matthew Gardner. This month we’re going to take a look at the latest SCE Housing Survey, which gives us a really detailed look at consumers’ psyche in regard to the housing market.

I’ve always been fascinated by surveys, as they frequently give me insights that I simply don’t get from just looking at raw data and, as luck would have it, the New York Fed just released its 2023 Consumer Expectations Housing Survey. Now, this particular survey has always given me some great and often surprising insights as to how the U.S. population views the overall housing market. We certainly don’t have time to cover all of the questions that the survey poses, but there was one section I wanted to share with you today as it really resonated with me, and it relates to mortgage rates.

Will mortgage rates continue to rise?

A double line graph showing mortgage rate predictions. Specifically, it shows the average interest rates for 30-year fixed-rate mortgages from 2014 to 2023 and ends with the predicted values by U.S. households as captured in the Federal Reserve Bank of New York in their 2023 Housing Survey. People think the rate will be 8.8% three years from now and 8.4% one year from now.

The first question asked was where they expected mortgage rates to be one year from now. And as you see here that, on average, households expected rates to rise all the way up to 8.4%. Although some may see this as extreme, you can see that in the 2022 survey respondents predicted rates would hit 6.7%, almost exactly where they were at the beginning of this March.

And when asked where they thought rates would be three years from now, on average, households expected to see them climb to 8.8%. Now, that’s a rate we haven’t seen since early 1995!

Well, I’m not sure about you, but I was very surprised by these results as they counter just about every analyst’s expectation regarding where rates will be over the next few years. In fact, myself and every economist I know believes that rates will slowly pull back as we move through this year. I haven’t seen a single forecast suggesting that mortgage rates will rise to a level this country hasn’t seen in decades.

But as they say, the devil’s in the details. When I dug deeper into the numbers, it became very clear to me that demographics played a pretty big part in guiding people’s answers. Let me explain.

1-Year Mortgage Rate Expectations by Education

Here the data is broken down by educational achievement. You can see that survey respondents who didn’t have a college degree thought that mortgage rates would rise to 9.4% within a year. But college graduates were far more optimistic, and they expected rates to be in the high 6’s.

3-Year Mortgage Rate Expectations by Education

And when asked to look three years out, respondents without degrees expected rates to break above 10%. While college graduates saw them pulling back a little from their one-year expectations of 6.7%, down to 6.4%.

Now we are going to look at the survey results broken down by housing tenure.

1-Year Mortgage Rate Expectations by Tenure

And here you see that renters expect mortgage rates to be at almost 11% within a year. And homeowners also saw them rising, but only up to 7.3%.

3-Year Mortgage Rate Expectations by Tenure

And over the next three years, renters expected rates to break above 12%. That’s a level not seen since the fall of 1985. But homeowners expected to see rates at a somewhat more modest 7.4%.

So, what does this tell us? I see two things.

Firstly, the rapid increase in mortgage rates that we all saw starting in early 2022 has a lot of people believing that we will see rates continuing to rise, sometimes at a very fast pace, over the next few years. I mean, if it happened before, why can’t it happen again? And this mindset leads me to my second point, which is that it’s very clear that a lot of would-be home buyers just don’t understand how mortgage rates are calculated.

The bottom line here is that I see a potential buyer pool out there that needs educating and that can give an opportunity to brokers to discuss how rates are set and where the market is expecting to see them going forward.

This may alleviate the concerns that many households have who may be thinking that they will never be able to afford to buy a home because of where they expect borrowing costs to be in the future. Education is everything, don’t you agree?

As always, I’d love to get your thoughts on this topic so please comment below! Until next month, take care and I will see you all soon. Bye now.

To see the latest housing data for your area, visit our quarterly Market Updates page.

About Matthew Gardner

Buyers • April 17, 2023

10 Important People in the Home Buying Process

by Gary Peterson

An older heterosexual Caucasian couple talks to an important person during their home buying process, their real estate agent. The real estate agent smiles as they review the terms of a real estate contract.

It takes a village to purchase a home. Though it’s ultimately you who is paying for the property, successfully purchasing a home is a result of several people’s contributions. It helps to know who these individuals are, how they responsibilities pertain to your home purchase, and when you’ll encounter them during your journey. Here are ten important people to keep in mind during the process of buying a home.

10 Important People in the Home Buying Process

1. Real Estate Agent

You’ll be represented by a buyer’s agent throughout the home buying process. Their access to resources and their specialized knowledge will help you find the home you’re looking for and make an offer to the seller. They will be by your side from day one, through closing and beyond. When searching for a real estate agent, ask questions to gain an understanding of their professional expertise as well as their personality. You’ll be working closely together throughout the process, so it’s important to identify someone who is compatible.

2. Mortgage Lender

You need financing to buy a home. Mortgage lenders offer different home loans to match what buyers can afford and what homes they’re looking to purchase. After identifying which lender you’d like to work with, a helpful first step is to get pre-approved for a mortgage by submitting financial information for their review. This helps to speed up the home buying process and solidifies your offer by demonstrating that you’re ready to buy.

3. Mortgage Broker

Your mortgage broker will work with you to find favorable mortgage terms for your home loan. Whereas your real estate agent works with you to find a home and communicates with the seller on your behalf, your mortgage broker works on the financial side of the transaction. Once you’ve chosen the right loan product, they’ll hand things off to the lender.

4. Underwriter

Another key player in the mortgage process is the underwriter. Underwriters review mortgage applications, looking at credit history to assess your ability to pay your loan. A mortgage loan doesn’t get the green light without an underwriter’s approval; if they find any issues, they’ll either deny the loan or require the applicant to provide more information before deciding.

5. Home Inspector

The home inspection is key to the home buying process. It gives you a chance to get a thorough examination of the home to discover which repairs need addressing, if any. The findings of the home inspector’s report will set the table for continued negotiations with the seller and their agent. Buyers will often include a home inspection contingency in their offer to allow for renegotiation or canceling the contract entirely.

A Caucasian man home inspector works during the home buying process. He shines a flashlight at plumbing pipes in the basement.

Image Source: Getty Images – Image Credit: Jupiter Images

6. Home Appraiser

A professional appraiser will determine a home’s appraised value, which ensures that the lender is loaning the correct amount of money. Home appraisers are third parties to real estate transactions; they have no vested interest in either side of the deal. The home’s square footage, features, and condition all factor into their assessment. If there’s a discrepancy between a home’s appraised value and the loan amount, you and the seller will go back into negotiations.

7. Seller

It takes two to tango. The seller is your counterpart in the home buying process, and they want to sell their home for the best price to the right buyer. Accordingly, you’ll work with your agent on how to make an offer that’s most appealing to the seller. This looks different for each real estate transaction. For example, if you find yourself in a bidding war, the seller may value offers that show flexibility toward the inspection and contingencies. Talk to your agent for more information.

8. Listing Agent

The listing agent represents the seller. Your agent will work with them to iron out the details of your offer and move the deal along toward completion. After the home inspection, the listing agent will also be the main point of contact for any repair requests.

9. Title Company

Before the home is officially yours, a title company will conduct a search of the property’s history and public records to make sure its title is in good legal standing. Titles and deeds have very specific language that makes the transfer of ownership official. Title companies will make sure that everything in these documents is properly recorded during the closing process.

10. Homeowners Insurance Company

Once you’ve purchased a home, you need to protect it. Homeowners insurance policies cover your home, your belongings, injury, or property damage to others, and living expenses if you are temporarily displaced from your home due to an insured disaster. The coverage you’ll need will depend on your home’s location and condition, but what’s most important is that you’re fully protected as a homeowner.