Market NewsMatthew Gardner February 6, 2023

Q4 2022 Utah Real Estate Market Update

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

Utah’s economy continues to add jobs, but the pace of growth has started to slow. Over the past 12 months, the state added 43,300 jobs. At an annual rate of 2.6%, this was the slowest pace of growth since the state started recovering jobs post-COVID. The counties covered by this report added more than 35,000 new jobs over the past year, which was also a growth rate of 2.6%. The state’s unemployment rate in November was 2.2%. This was marginally below the rate of the prior year but impressive all the same. It is equally impressive to see that the unemployment rate remained at a very low level even as the state added over 52,400 people to the workforce.

Utah Home Sales

❱ In the final quarter of 2022, 5,145 homes sold in the areas covered by this report. This was down 45% compared to the same period the previous year and down 27.8% compared to the third quarter of 2022.

❱ Sales fell across the board compared to both the fourth quarter of 2021 and the third quarter of 2022.

❱ Inventory levels have skyrocketed, with the average number of homes on the market up a remarkable 248% from the same period in 2021. Listing activity fell 8.3% from the third quarter, but that wasn’t surprising given seasonal factors.

❱ Significantly higher inventory levels gave buyers a lot more options than they have become accustomed to. This, combined with higher mortgage rates, likely impacted sales in the fourth quarter.

A bar graph showing the annual change in home sales for various counties in Utah from Q4 2021 to Q4 2022. All counties have a negative percentage year-over-year change. Here are the totals: Morgan at -17.4%, Davis at -37.4%, Weber at -41.9%, Wasatch at -45.5%, Utah County at -46.5%, Salt Lake at -46.7%, and Summit at -49.1%.

Utah Home Prices

❱ The average sale price in the fourth quarter rose a modest .6% from the fourth quarter of 2021 to $604,105. Prices were 3.7% lower than in the third quarter of 2022.

❱ Median listing prices were 3.6% lower than in the third quarter, suggesting that higher financing costs may have created a price ceiling. That said, listing prices were higher in Morgan, Wasatch, and Summit counties compared to the prior quarter.

❱ Year over year, prices rose in four markets but pulled back in the other three. Compared to the third quarter of 2022, average home prices fell in every area other than Summit County, where they rose .8%.

❱ The bull market that has been in place for quite some time appears to have lost its momentum. I am not concerned by this and expect the market to moderate as it comes to terms with higher financing costs.

A map showing the real estate home prices percentage changes for various counties in Utah. Different colors correspond to different tiers of percentage change. Summit and Morgan have a percentage change in the -6.5% to -4.1% range, Davis is in the -1.5% to 0.9% change range, Weber, Salt Lake, and Wasatch are in the 1% to 3.4% range, and Utah is in the 3.5%+ change range.

A bar graph showing the annual change in home sale prices for various counties in Utah from Q4 2021 to Q4 2022. Utah County tops the list at 4%, followed by Wasatch at 2.8%, Weber at 2.4%, Salt Lake at 2.0%, Davis at 0.3%, Summit at -4.7%, and Morgan at -6.4%.

Mortgage Rates

Rates rose dramatically in 2022, but I believe that they have now peaked. Mortgage rates are primarily based on the prices and yields of bonds, and while bonds take cues from several places, they are always impacted by inflation and the economy at large. If inflation continues to fall, as I expect it will, rates will continue to drop.

My current forecast is that mortgage rates will trend lower as we move through the year. While this may be good news for home buyers, rates will still be higher than they have become accustomed to. Even as the cost of borrowing falls, home prices in expensive markets will probably fall a bit more to compensate for rates that will likely hold above 6% until early summer.

A bar graph showing the mortgage rates from Q4 2020 to the present, as well as Matthew Gardner's forecasted mortgage rates through Q4 2023. After the 6.79% figure in Q4 2022, he forecasts mortgage rates dipping to 6.27% in Q1 2023, 6.09% in Q2 2023, 5.76% in Q3 2023, and 5.42% in Q4 2023.

Utah Days on Market

❱ The average time it took to sell a home in the counties covered by this report rose 27 days compared to the same period in 2021.

❱ Homes sold fastest in Salt Lake County and slowest in Summit County. All areas saw average market time rise compared to the third quarter of 2022 as well as the fourth quarter of 2021.

❱ It took an average of 55 days to sell a home during the fourth quarter. Market time rose 22 days from the third quarter of 2022.

❱ It is likely that home buyers are waiting for asking prices to fall further and hoping that mortgage rates do the same.

A bar graph showing the average days on market for homes in various counties in Utah for Q4 2022. Salt Lake County has the lowest DOM at 44, followed by Weber and Davis at 49, Utah at 52, Wasatch at 58, Morgan at 62, and Summit at 70.

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.

The state’s economy is still performing very well, but this is not enough to push the housing market forward at the pace we saw during the height of the pandemic. I expect the region will continue to see downward pressure on home prices, but a major correction is unlikely. It’s more likely that as mortgage rates continue to decline, the market will find a solid floor in the summer and prices will resume their upward trend as we move into the fall.

A speedometer graph indicating a balanced market in Utah in Q4 2022.

The Utah housing market does not yet significantly favor home buyers but, given the data discussed in this report, it has certainly shifted away from sellers and into neutral territory. I have moved the needle accordingly.

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 NewsMatthew Gardner January 23, 2023

2023 Real Estate Forecast: Why This Market Won’t Be Like 2008

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.



Hello there, I’m Windermere’s Real Estate’s Chief Economist Matthew Gardner and welcome to the first episode of “Monday with Matthew” for 2023. As has become tradition, this first episode of the year will be dedicated to my real estate forecast for the U.S. housing market, so let’s get straight to it.

2023 Real Estate Forecast

Existing Home Sales & Forecast

From Matthew Gardner's 2023 real estate forecast, a bar graph showing the existing home sales for the years 2015 through 2021, plus forecasts for 2022 and 2023. The y-axis is in millions and the x-axis contains the years. The numbers are as follows (in millions): 5.3 in 2015, 5.5 in 2016 and 2017, 5.3 in 2018 and 2019, 5.6 in 2020, 6.1 in 2021, 5.1 (forecasted) in 2022, and 4.8 (forecasted) in 2023.

Image Source: Matthew Gardner

 

U.S. home sales trended lower through all of 2022 and, although I believe that sales will still have held above five million, this certainly won’t be the case in 2023. Affordability and higher financing costs will continue to act as headwinds when it comes to sales, but I think that the bigger issue will be that listing activity will not rise significantly as we move through the year.

As I have been saying for several months now, I don’t see why many households who don’t have to move will move and lose the historically low interest rate that they currently benefit from. That said, sales will still occur this year but at just 4.8 million, sales will be lower than we have seen since 2014.

Annual Change in Median Sale Prices

From Matthew Gardner's 2023 real estate forecast, a bar graph showing the annual change in median sale prices for homes in the U.S. real estate market. The years 2015 through 2023 are on the x-axis and percentages -4% through 20% run the length of the y-axis. The numbers are as follows: 6.8% in 2015, 5.1% in 2016, 5.7% in 2017, 4.9% in 2018 and 2019, 9.1% in 2020, 18.2% in 2021, 8.7% (forecasted) in 2022, and -1.1% (forecasted) in 2023.

Image Source: Matthew Gardner

 

Much has been said about the future of home prices, with some forecasters even suggesting that housing prices will collapse in a similar fashion to that seen following the bursting of the housing bubble back in 2008. Now, although price growth through the pandemic period was clearly excessive, fundamentally speaking, the two periods cannot be considered to be similar at all.

It’s my opinion that sale prices in 2023 will be very modestly lower than last year and I certainly don’t expect to see a collapse in home values.

But not all markets are created equal. The pandemic created what has become known as “Zoom-Towns.” These were cheap markets that affluent buyers flocked to because of their newly found ability to work from home and this led sale prices there to soar. It’s these locations that will likely see prices fall more significantly. Ultimately, expect to see prices fall through the first half of this year before starting to recover in the second half.

New Home Starts & Forecast (Single Family)

From Matthew Gardner's 2023 real estate forecast, a bar graph of the single-family new home starts. The y-axis shows numbers in thousands from 0 to 1,200 and the x-axis shows the years 2015 through 2023. The numbers are as follows: 715 in 2015, 782 in 2016, 849 in 2017, 876 in 2018, 888 in 2019, 991 in 2020, 1,127 in 2021, 1,009 (forecasted) in 2022, and 837 (forecasted) in 2023.

Image Source: Matthew Gardner

 

Looking now at the new construction market, housing starts fell last year as construction costs remained high and mortgage rates rose which lowered demand.  And I’m afraid that I do not see 2023 as being one where builders will deliver more inventory, with starts pulling back to a level the country hasn’t seen since 2016. That said, I am expecting a recovery in 2024 when new home starts will break back above the 1,000,000 level.

New Home Sales Forecast

From Matthew Gardner's 2023 real estate forecast, a bar graph showing the new home sales numbers from the U.S. housing market. The y-axis shows (in thousands) the numbers 200 to 900 and the x-axis shows the years 2015 through 2023. The number of new home sales are as follows (in thousands): 501 in 2015, 561 in 2016, 613 in 2017, 617 in 2018, 683 in 2019, 822 in 2020, 771 in 2021, 653 (forecasted) in 2022, and 584 (forecasted) in 2023.

Image Source: Matthew Gardner

 

New home sales in 2023 will fall further coming in below 600,000 but there is some light at the end of the tunnel with sales picking up fairly significantly again in 2024. We all understand that the country has a significant undersupply of ownership housing, but the costs associated with building new homes is still making it remarkably hard for builders even though they understand that demand will be significant for at least the next decade and a half given current demographics.

But the problem they will continue to face is that demand will primarily come from entry level buyers and, simply put, the cost to build a home precludes many developers from being able to meet this demand.

Average 30-Year Mortgage Rate & Forecast

A bar graph showing the average 30-year mortgage rate for the years 2015 through 2023. The y-axis shows percentages ranging from 0% to 7% and the years are displayed on the x-axis. The numbers are as follows: 3.9% in 2015, 3.7% in 2016, 4% in 2017, 4.5% in 2018, 3.9% in 2019, 3.1% in 2020, 3% in 2021, 5.4% in 2022, and 6.1% (forecasted) in 2023. This is the mortgage rate component of Matthew Gardner's 2023 real estate forecast.

Image Source: Matthew Gardner

 

And finally, my forecast for mortgage rates in 2023. Although this might not look good at all, as they say, “the devil is in the details.” Rates skyrocketed last year as the Fed stopped buying treasuries and mortgage-backed securities and, although they are off the highs we saw toward the end of last year, they are still significantly higher today than the market has become used to seeing.

As you can see here, I’m anticipating the average 30-year conventional rate to average 6.1% in 2023, but my forecast is actually a bit better than this shows.

Average 30-Year Mortgage Rate Forecast 2023

A bar graph showing the average 30-year mortgage rate in recent quarters, plus a forecast of the mortgage rate for each quarter in 2023. The y-axis displays percentages ranging from 0% to 7% and the x-axis displays the quarters from Q4 2021 to Q4 2023. The numbers are as follows: 3.1% in Q4 2021, 3.8% in Q1 2022, 5.3% in Q2 2022, 5.6% in Q3 2022, 6.8% in Q4 2022, 6.4% (forecasted) in Q1 2023, 6.1% (forecasted) in Q2 2023, 6% (forecasted) in Q3 2023, and 5.6% (forecasted) in Q4 2023. This is the mortgage rate component to Matthew Gardner's 2023 real estate forecast.

Image Source: Matthew Gardner

 

You see, my quarterly forecast suggests that rates have actually already peaked, and that they will trend lower as we move through this year and break below 6% by the fourth quarter. I would add that if anything my forecast may be a little pessimistic, and rates may end 2023 a little lower than I am showing here.

But that will depend on the Fed, and how long they will continue raising rates, and how long it will take before they start to lower them if the US enters a recession this year, which many forecasters including myself believe will be the case.

So, there you have it, my 2023 U.S. housing forecast. I will leave you with this one last thought. 2023 will be a transition year when the housing market will come off the “high” we saw during the pandemic and borrowing costs were artificially low.

I don’t see any reason for buyers or sellers to panic though. By the end of 2023, most markets will have corrected themselves and I believe we will see prices and demand start to pick up again toward the end of this year, but at a far more normalized pace.

As always, I look forward to your comments on my forecasts and I’ll see you all again next month. Take care now.

 


About Matthew Gardner

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.

Selling January 9, 2023

Staying Safe When Selling Your Home

Staying organized while selling your home can feel impossible, especially if you’re buying a new home at the same time. There’s also the pressure to keep your home clean and tidy for showings to prospective buyers. In all the chaos, taking the proper safety precautions can fall by the wayside, but it is something that should be prioritized. Keep these safety tips in mind as you work with your agent to sell your home.

We’ve assembled a comprehensive checklist of the common tasks required to get your home ready to sell. It is available as an interactive web page and downloadable PDF here:

  • Get Ready to Sell Checklist

How to Prepare for an Open House

Open houses are a major driver of buyer interest. Preparing for an open house is a matter of boosting curb appeal, cleaning, and staging to get your home in tip-top shape. It’s vital that you and your agent take certain safety precautions, given that you likely won’t be on sight when the open houses occur. Buyers often feel uneasy in the presence of the seller when touring a home. It also makes it more difficult for them to visualize the space as their own. Accordingly, it’s best to let your agent handle the open house. Here is a helpful list of how to prepare.

Staying Safe When Selling Your Home

  • Go through your medicine cabinets and remove all prescription medications.
  • Remove or lock up precious belongings and personal information. You will want to store your jewelry, family heirlooms, and personal/financial information in a secure location to keep them from getting misplaced or stolen.
  • It is best to remove all family photos during the staging process so potential buyers can see themselves living in the home; it’s also a good way to protect your privacy.
  • Check that your windows and doors are secure before and after showings. If an intruder is looking to get back into your home following a showing or an open house, they will look for weak locks or unlocked windows and doors.
  • Consider extra security measures such as an alarm system or other monitoring tools like home security cameras.

 

A real estate agent performs a walkthrough of a new home for a prospective buyer. The agent leads the buyer through the open kitchen/dining room area. The home has dark hardwood floors and geometric wallpaper along the kitchen island.

Image Source: Getty Images – Image Credit: ferrantraite

 

Talk to your agent about the following safety precautions:

  • Perform a thorough walk-through with your agent to make sure you have identified everything that needs to be removed or secured (medications, belongings, photos, etc.)
  • Go over your agent’s screening process so you are both on the same page about how to qualify buyers before showings.
  • Lockboxes to secure your keys for showings should be up to date. Electronic lockboxes track who has accessed your home.
  • Go through your home’s entrances and exits and share important household information so your agent can advise you on how to secure your property while it’s on the market.
Buyers December 27, 2022

Homeownership Terms to Know: Rent-Back Agreement, Joint Tenancy & More

From the outside, buying a home may seem like a zero-sum game: the seller relinquishes ownership of a property to the buyer in exchange for money and the buyer becomes the property’s new outright owner. However, there’s more nuance to homeownership than meets the eye. The following homeownership agreements provide alternatives to a traditional home purchase. These options may be right for you when searching for your next home.

Homeownership Terms to Know

Rent-Back Agreement

A rent-back agreement (also known as a sale lease-back) is tailor-made for homeowners who are buying a home while selling their current one. Buying a home and selling a home are both significant undertakings in their own right, but when combined, everything is heightened. For all your planning, successfully executing both transactions is predicated on a variety of factors, including the local market conditions in both places.

A rent-back agreement is a clause in the sales contract that allows the seller to rent their old home from the buyer for an agreed-upon period of time before the buyer moves in. The agreement will include the length of the rental period and the seller’s rental costs, while spelling out the responsibilities of each party during the transition.

These agreements are mutually beneficial to buyers and sellers. Not only do sellers buy themselves time to find their new home, they collect proceeds from the sale of their current one, which can be used to help fund their new home purchase when the time comes. The money collected from sellers’ rent payments is an obvious bonus for buyers. And in a competitive market, making an offer that gives the seller flexibility in their moving timeline may help it stand out amongst the competition.

 

A real estate agent tours a home with two buyers. They have a brief meeting in the living room where the agent shows them paperwork for the home purchase.

Image Source: Getty Images – Image Credit: FG Trade

 

Joint Tenancy

When two or more people purchase a property together, Joint Tenancy with Right of Survivorship (JTWROS) requires that all co-buyers hold an equal interest in the property and that they all come into ownership through the same title at the same time. If one co-owner dies, ownership passes to the other co-owner—this is known as Right of Survivorship.

This form of co-buying a home presents an opportunity to prospective home buyers who may not yet have the means to purchase a home on their own by combining their buying power with that of their co-buyer. However, entering a real estate transaction with a co-buyer means that you’re financially tied together, which opens the door for added risk.

Tenancy In Common

When co-buyers hold a title as tenants in common, shares of the property can be divided equally or unequally. But even with a disparity in ownership percentage, no one owner may claim sole ownership of the property. When a tenant in common passes away, their ownership is bequeathed to their designated heir.

Tenancy In Severalty

Unlike Joint Tenancy and Tenancy in Common, Tenancy in Severalty represents an agreement in which one individual, corporation, or entity owns the property and does not share ownership with anyone.

Design December 13, 2022

Art Deco Interior Design

There are countless interior design styles to inspire your home décor efforts, but some stand out above the rest. Art Deco is one such style. Though its roots trace back to a specific period, its long-lasting relevance has given it the unique ability to feel vintage, modern, and timeless all at once. Whatever home décor goals you have in mind, going behind the curtain on the history and concepts of Art Deco will help inspire your efforts.

Art Deco Interior Design

Art Deco is a decorative take on modernist style from the early twentieth century. One look at interiors designed in typical Art Deco style immediately brings the elegance of the 1920s and 1930s to mind. Art Deco, like the Mid-Century Modern movement that followed it, went beyond just interior design; it encompassed fashion, architecture, the auto industry, and more. Driven by an appreciation for the modern machines of the time, Art Deco emphasized sophistication in a nontraditional sense.

 

A living room with art deco decorations including a chandelier, a regal tufted green couch, gold decorations, and a dark wooden piano and coffee table.

Image Source: Getty Images – Image Credit: Nikada

 

Art Deco in Your Home

Art Deco can help to transform your home’s interior, but you don’t have to aim for a level of opulence Jay Gatsby would approve of to reap its rewards. The concepts found in modern adaptations of Art Deco can fit any budget, and the materials used to execute it are widely available.

Art Deco Concepts

Geometry is a cornerstone of Art Deco décor. You’ll often see spaces decorated in this style using geometric shapes like chevrons and sunbursts in parquet wood flooring and tilework. Rounded corners and smooth walls are principal architectural features. Mirrors are also central to an Art Deco aesthetic, helping to create symmetry without taking away from the rest of the room. Framed mirrors and mirror walls alike are popular features.

In the style of modern and minimalist decoration, Art Deco showcases a preference for uncluttered spaces with minimal furniture, letting the decorative elements shine. Optimal furniture pieces often come with mirrored and/or veneer façades, heavy lacquer, rounded edges, and circular designs. Go for bold colors when decorating, working from a neutral base. Silver and gold feel right at home in an Art Deco environment, as do alternative neutrals such as cream and beige.

 

Lilac color dining room in trendy art deco style with modern furniture, served table and chairs.

Image Source: Getty Images – Image Credit: Peter_visual

 

Art Deco Materials

Common materials include veneer, stainless steel, and chrome. Frames for a gallery wall and tableside lamps are great uses for gold and steel, which are two signature Art Deco materials. Making smaller ornate décor choices such as intricately framed mirrors and accent lighting fixtures will help to create a regal atmosphere while staying within your budget.

Selling November 28, 2022

Remodeling Projects to Avoid When Selling Your Home

It’s common for homeowners to feel compelled to remodel their homes before they sell. Renovating the spaces in your home can increase its value and help you compete with comparable listings in your area. However, some remodeling projects are more beneficial than others as you prepare to sell your home. Always talk to your agent to determine which projects are most appealing to buyers in your area.

Remodeling Projects to Avoid When Selling Your Home

When preparing to sell your home, you want to strike the right balance of upgrades. Making repairs and executing renovations will attract buyer interest, but you don’t want to dump so much cash into remodeling that you won’t be able to recoup those expenses when your home sells.

So, how do you know where to focus your efforts? Your agent is a vital resource in understanding your specific situation and will offer guidance on your remodeling efforts to sell your home for the best price. Here are a few projects sellers will want to keep off their to-do lists for the best return on investment.

 

A man and woman discuss a renovation project with their real estate agent as construction contractors work in the background

Image Source: Getty Images – Image Credit: skynesher

 

Minor Cosmetic Upgrades

Whether you’ve made small cosmetic upgrades throughout your home typically isn’t a make-or-break proposition for most buyers. Let’s say you’re questioning whether to invest in a new toilet, vanity, and shower for your primary bathroom before selling. Unless these appliances are damaged and you can repair them without spending too much, it’s okay to sell as is.

Major Upgrades with Long Timelines

For any remodeling project, your agent’s analysis will help you determine its risk/reward potential. This dynamic is heightened with major remodeling projects and home upgrades, due to their higher costs. Four of the six lowest ROI remodeling projects found in the Remodeling 2022 Cost vs. Value Report (www.costvsvalue.com)1 are upscale or major upgrades, all with roughly a 50% return on investment.

These projects come with hefty price tags and longer timelines than minor repairs and upgrades, which can complicate factors as you prepare to sell, especially if you have a deadline to get into your new home. They have the potential to temporarily displace you from the property, meaning you and your household may have to find somewhere else to stay until the project is complete.

  • The Bottom Line: To go through with a major home upgrade before you sell, its schedule must fit with your moving timeline. It should also align with buyer interest in your local market. If the project doesn’t meet these criteria, it should be avoided.

Building Code Violations

The rules dictating whether you can sell your home with building code violations vary region to region. It also depends on what the building code violation is and whether neglecting to update it is deemed a safety hazard. The buyer’s mortgage lender may also have stipulations saying that the loan may not be used to purchase a home with certain features that aren’t up to code, which could lead to them backing out of the deal.

If you’re selling an older home, you’re not obligated to update every feature that may be out of code to fit modern standards. These projects are often structural and require a significant investment. If the violation in question was built to code according to the regulations at the time, then a grandfather clause typically applies. However, you’ll need to disclose these features to the buyer.

Trendy Makeovers and Upgrades

Lastly, it’s best to avoid remodeling projects that target a specific trend in home design. Trends come and go. Timeless design is a hallmark of marketable homes because it appeals to the widest possible pool of buyers. Keep this in mind when staging your home as well. Creating an environment that’s universally appealing and depersonalized allows buyers to more easily imagine the home as their own.

Market NewsMatthew Gardner November 14, 2022

Matthew Gardner’s Top 10 Predictions for 2023


This video shows Windermere Chief Economist Matthew Gardner’s Top 10 Predictions for 2023. 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.


Matthew Gardner’s Top 10 Predictions for 2023

1. There Is No Housing Bubble

Mortgage rates rose steeply in 2022 which, when coupled with the massive run-up in home prices, has some suggesting that we are recreating the housing bubble of 2007. But that could not be further from the truth.

Over the past couple of years, home prices got ahead of themselves due to a perfect storm of massive pandemic-induced demand and historically low mortgage rates. While I expect year-over-year price declines in 2023, I don’t believe there will be a systemic drop in home values. Furthermore, as financing costs start to pull back in 2023, I expect that will allow prices to resume their long-term average pace of growth.

2. Mortgage Rates Will Drop

Mortgage rates started to skyrocket at the start of 2022 as the Federal Reserve announced their intent to address inflation. While the Fed doesn’t control mortgage rates, they can influence them, which we saw with the 30-year rate rising from 3.2% in early 2022 to over 7% by October.

Their efforts so far have yet to significantly reduce inflation, but they have increased the likelihood of a recession in 2023. Therefore, early in the year I expect the Fed to start pulling back from their aggressive policy stance, and this will allow rates to begin slowly stabilizing. Rates will remain above 6% until the fall of 2023 when they should dip into the high 5% range. While this is higher than we have become used to, it’s still more than 2% lower than the historic average.

3. Don’t Expect Inventory to Grow Significantly

Although inventory levels rose in 2022, they are still well below their long-term average. In 2023 I don’t expect a significant increase in the number of homes for sale, as many homeowners do not want to lose their low mortgage rate. In fact, I estimate that 25-30 million homeowners have mortgage rates around 3% or lower. Of course, homes will be listed for sale for the usual reasons of career changes, death, and divorce, but the 2023 market will not have the normal turnover in housing that we have seen in recent years.

4. No Buyer’s Market But a More Balanced One

With supply levels expected to remain well below normal, it’s unlikely that we will see a buyer’s market in 2023. A buyer’s market is usually defined as having more than six months of available inventory, and the last time we reached that level was in 2012 when we were recovering from the housing bubble. To get to six months of inventory, we would have to reach two million listings, which hasn’t happened since 2015. In addition, monthly sales would have to drop below 325,000, a number we haven’t seen in over a decade. While a buyer’s market in 2023 is unlikely, I do expect a return to a far more balanced one.

5. Sellers Will Have to Become More Realistic

We all know that home sellers have had the upper hand for several years, but those days are behind us. That said, while the market has slowed, there are still buyers out there. The difference now is that higher mortgage rates and lower affordability are limiting how much buyers can pay for a home. Because of this, I expect listing prices to pull back further in the coming year, which will make accurate pricing more important than ever when selling a home.

6. Workers Return to Work (Sort of)

The pandemic’s impact on where many people could work was profound, as it allowed buyers to look further away from their workplaces and into more affordable markets. Many businesses are still determining their long-term work-from-home policies, but in the coming year I expect there will be more clarity for workers. This could be the catalyst for those who have been waiting to buy until they know how often they’re expected to work at the office.

7. New Construction Activity Is Unlikely to Increase

Permits for new home construction are down by over 17% year over year, as are new home starts. I predict that builders will pull back further in 2023, with new starts coming in at a level we haven’t seen since before the pandemic.

Builders will start seeing some easing in the supply chain issues that hit them hard over the past two years, but development costs will still be high. Trying to balance homebuilding costs with what a consumer can pay (given higher mortgage rates) will likely lead builders to slow activity. This will actually support the resale market, as fewer new homes will increase the demand for existing homes.

8. Not All Markets Are Created Equal

Markets where home price growth rose the fastest in recent years are expected to experience a disproportionate swing to the downside. For example, markets in areas that had an influx of remote workers, who flocked to cheaper housing during the pandemic, will likely see prices fall by a greater percentage than other parts of the country. That said, even those markets will start to see prices stabilize by the end of 2023 and resume a more reasonable pace of price growth.

9. Affordability Will Continue to Be a Major Issue

In most markets, home prices will not increase in 2023, but any price drop will not be enough to make housing more affordable. And with mortgage rates remaining higher than they’ve been in over a decade, affordability will continue to be a problem in the coming year, which is a concerning outlook for first-time buyers.

Over the past two years, many renters have had aspirations of buying but the timing wasn’t quite right for them. With both prices and mortgage rates spiraling upward in 2022, it’s likely that many renters are now in a situation where the dream of homeownership has gone. That’s not to say they will never be able to buy a home, just that they may have to wait a lot longer than they had hoped.

10. Government Needs to Take Housing More Seriously

Over the past two years, the market has risen to such an extent that it has priced out millions of potential home buyers. With a wave of demand coming from Millennials and Gen Z, the pace of housing production must increase significantly, but many markets simply don’t have enough land to build on. This is why I expect more cities, counties, and states to start adjusting their land use policies to free up more land for housing.

But it’s not just land supply that can help. Elected officials can assist housing developers by utilizing Tax Increment Financing tools, whereby the government reimburses a private developer as incremental taxes are generated from housing development. There are many tools like this at the government’s disposal to help boost housing supply, and I sincerely hope that they start to take this critical issue more seriously.

 


About Matthew Gardner

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 NewsMatthew Gardner November 3, 2022

Q3 2022 Utah Real Estate Market Update

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

Utah’s economy continues to add jobs. The 53,600 jobs created statewide over the past year represent a growth rate of 3.3%. The counties covered by this report added more than 40,000 new jobs over the past year, which is a growth rate of 3%. The state’s unemployment rate in August was 2%, which is marginally above the all-time low of 1.9% reported in April of this year. The labor force continues to expand, suggesting that the region expects economic growth to remain strong. Even though the state has seen a modest decline in the pace of job growth, the numbers are still very impressive.

Utah Home Sales

❱ In the third quarter, 7,134 homes sold. This was 31.6% fewer sales than a year ago and down 16.1% compared to the second quarter of this year.

❱ Year over year, sales fell across the board. Sales in all markets covered by this report were lower than in the second quarter of 2022 as well.

❱ Inventory levels continue to grow, with the average number of homes for sale in the quarter 149% higher than a year ago and up 79% from the second quarter of this year.

❱ Buyers, who seemed to ignore rising mortgage rates in the second quarter, are now feeling the impact of higher financing costs and have taken a pause.

A bar graph showing the annual change in home sales for various counties in Utah from Q3 2021 to Q3 2022. All counties have a negative percentage year-over-year change. Morgan County tops the list at -4.8%, followed by Weber at -26.5%, Davis -30.1%, Salt Lake -30.9%, Utah -32.4%, Wasatch -40.5%, and Summit at -46.8%.

Utah Home Prices

❱ The average home sale price in the third quarter was up 5.9% from a year ago to $627,503. However, prices fell 5.7% compared to the second quarter of this year.

❱ Median listing prices in the third quarter were down across the board. Sellers appear to be coming to terms with the fact that the remarkably buoyant market we’ve experienced since the start of the pandemic has now ended.

❱ All areas contained in this report except Morgan County had higher sale prices than a year ago. Compared to the second quarter of this year, only Wasatch County had higher sale prices.

❱ Although the data suggests that a market correction has started, I don’t find this terribly troubling. Homeowners have seen a remarkable run-up in home values over the past couple of years. It was only a matter of time before the market reverted back to a more sustainable pace of price growth.

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 County is in the -10.6% to -6.1% range. Weber, Davis, Salt Lake, and Wasatch County have a percentage change in the 3.2% to 7.7% range, and Utah and Summit are in the 7.8%+ range.

A bar graph showing the annual change in home sale prices for various counties in Utah from Q3 2021 to Q3 2022. Utah County tops the list at 12.3%, followed by Summit at 9.1%, Salt Lake at 7.5%, Weber at 6.7%, Davis at 5.8%, Wasatch at 4%, and Morgan at -10.3%.

Mortgage Rates

This remains an uncertain period for mortgage rates. When the Federal Reserve slowed bond purchases in 2013, investors were accused of having a “taper tantrum,” and we are seeing a similar reaction today. The Fed appears to be content to watch the housing market go through a period of pain as they throw all their tools at reducing inflation.

As a result, mortgage rates are out of sync with treasury yields, which not only continues to push rates much higher, but also creates violent swings in both directions. My current forecast calls for rates to peak in the fourth quarter of this year before starting to slowly pull back. That said, they will remain in the 6% range until the end of 2023.

A bar graph showing the mortgage rates from 2020 to the present, as well as Matthew Gardner's forecasted mortgage rates through Q4 2023. After the 5.62% figure in Q3 2022, he forecasts mortgage rates continuing to climb to 6.7% in Q4 2022, 6.55% in Q1 2023, 6.35% in Q2 2023, 6.15% in Q3 2023, and 5.60% in Q4 2023.

Utah Days on Market

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

❱ Though homes sold fastest in Salt Lake County, average market time rose in all counties covered by this report year over year. Days on market was also higher in every county compared to the second quarter of this year.

❱ During the quarter, it took an average of 33 days to sell a home in the region. Market time rose 15 days compared to the second quarter of 2022.

❱ Rapidly rising inventory levels and mortgage rates have put the brakes on the Utah housing market.

A bar graph showing the average days on market for homes in various counties in Utah for Q3 2022. Salt Lake County has the lowest DOM at 27, followed by Davis at 28, Utah at 30, Weber at 31, Morgan at 34, Wasatch at 37, and Summit at 41.

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.

Although Utah’s economy remains strong, the housing market is now feeling the effects of mortgage rates that were 2.7% higher than in the third quarter of 2021. With rates expected to rise even more in the fourth quarter before hopefully levelling off in early 2023, I anticipate that prices will decline further from their current levels. While this may seem like a dire situation to some, homeowners have seen their equity leap since the pandemic started. Though the expected drop in home values may be disconcerting for owners, it’s necessary for the market to return to more realistic conditions. I expect that some would-be sellers will decide to wait until the market stabilizes before listing their homes, while others will decide not to sell at all. This will limit how far inventory levels will rise. As such, I don’t see the market reaching saturation.

A speedometer graph indicating a balanced market, leaning toward a seller's market in Utah in Q3 2022.

The Utah housing market is in a period of reversion that will bring it back to balance, which is actually positive for the long-term health of the market. Buyers have more choice, but many will wait until financing costs and the market start to stabilize before they resume their search for a home. We still aren’t in a buyer’s market, but we are certainly getting closer to balance. As such, I have moved the needle far closer to the middle.

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.

Living October 24, 2022

5 Pet-Friendly House Cleaning Tips

Pets make a house a home. But as much as you love your furry friends, they do add a few entries to your list of chores. Keeping your home clean requires a bit of extra work, and some methods of upkeep are more pet-friendly than others. The following tips will help you keep your house clean and your pets happy.

5 Pet-Friendly House Cleaning Tips

1. Safely Clean Up Accidents

When pet owners buy a home, they proceed knowing full well that pet accidents and messes are bound to happen. Cleaning up messes quickly is important for keeping your home clean, but it will also remove the scent, so your pets don’t come back to that same area with the same intentions. When shopping around, look for cleaning products that are safe for animals and don’t contain any toxic chemicals.

2. Deep Clean to Reduce Smells

Pets have a knack for leaving a scent behind. Every pet owner knows the feeling of going through their normal cleaning routine to extinguish the pet smell from their home, only for it to linger after they’re done. To really get your home smelling fresh again, you’ll need to target your pets’ favorite areas as well as the commonly missed cleaning spots throughout your home like underneath furniture, along the baseboards, etc. You’ll be surprised at how much dirt and fur you find in these places.

 

An orange cat watches her owner work on his computer as he sits on the living room couch

Image Source: Getty Images – Image Credit: Marco VDM

 

3. Clean Pet Toys Regularly

Your pets’ toys are magnets for dirt, fur, drool, and other unwanted substances. It’s a homeowner’s nightmare to imagine spending hours cleaning your home top to bottom, only for a muddy ball your pets have been chewing on to roll across the carpet. Cleaning toys regularly is also healthier for your pets as it helps to reduce the spread of germs. If your pets’ toys are dishwasher safe, pop them in the dishwasher every once in a while to get them squeaky clean.

4. Keep the Air Clean

Even after you’ve exhausted all your cleaning efforts on the surfaces throughout your home, pet fur and dander can still travel through the air. It’s important to clean the air in your home, especially if members of your household have allergies. Consider investing in an air purifier, which will filter air particles to remove dust and odors, giving everyone in your home—pets included—cleaner air to enjoy.

5. The Importance of Well-Groomed Pets

In the context of a clean, pet-friendly home, there’s one surface that’s more important than any—your pets themselves. Every pet owner has their routine; whether that’s regularly maintaining their cat’s litter box, wiping off the dog’s paws in the mudroom before letting them inside, regular baths and brushing, or keeping nails trimmed to avoid furniture and carpet damage, these are the boxes that must be checked to keep your home clean. For all your cleaning efforts, if your pets are still messy, then the spaces in your home will follow suit.

Windermere Community October 17, 2022

Windermere Foundation Gala Raises $1.6 Million

In what has already been a banner year for the Windermere Foundation, the inaugural Windermere Foundation Gala took things to new heights. Held on the evening of September 30 at the Sheraton Grand in downtown Seattle, Windermere agents, owners, and staff dressed to the nines for a night of live entertainment and fundraising for low-income and homeless families throughout the Western U.S.

With 2022 being Windermere’s 50th anniversary, the company set its sights on reaching $50 million in total donations for the Windermere Foundation by the end of the year. At the end of 2021, the grand total stood at $46 million raised since the Foundation began in 1989, leaving a roughly $4 million gap to reach the $50 million goal. Through the spring and summer, we saw an outpouring of support as Windermere offices around the network stepped up their fundraising and giving efforts. By the end of July, total year-to-date donations surged past $2 million, pushing the grand total to nearly $48 million.

The Windermere Foundation Gala

Then came the night of the Gala, during which the Windermere Foundation would receive the Excellence Award from the 5th Avenue Theatre. Windermere founder John Jacobi and family accepted the award on behalf of Windermere and expressed their commitment to continue their legacy of giving both personally and through the Windermere Foundation. But the Gala was more than a celebration; it was a massive fundraiser, with proceeds from ticket sales, table purchases, donations, and auction bids going back to communities throughout the Windermere footprint.

 

Windermere Foundation Gala attendees bid on a pizza oven in the ballroom foyer of the Grand Sheraton hotel in Seattle, WA

Image Source: Panravee Fernando – panraveephotography.com

 

As the Gala attendees entered the foyer of the Sheraton Grand Ballroom, they bid on silent auction packages displayed throughout the room. Up for auction were locally curated experiences and goods alike, including multiple-night stays at luxury resorts, tickets to a Broadway production, and more. Next was the live auction. Bids went up for 11 special packages, including a skiing adventure at an upscale resort in Park City, a guided fly-fishing excursion in Montana, and others. As part of an exclusive Pearl Jam auction package, their guitarist Mike McCready was in attendance, adding his signature on stage to an electric guitar signed by the band members.

 

Pearl Jam guitarist Mike McCready signs an electric guitar on stage at the Windermere Foundation gala. The item would go up for auction as part of a Pearl Jam package.

Image Source: Panravee Fernando – panraveephotography.com

 

Finally, the Gala attendees participated in Raise the Paddle, where they contributed donations at different levels. Windermere founder John Jacobi kickstarted the giving with a $100,000 donation, and from there, auctioneer John Curley guided the audience through descending levels of support, calling out bidder number after bidder number in what was an outpouring of giving from the audience. The Windermere network more than doubled the $250,000 goal of Raise the Paddle, ultimately raising $520,250 in donations.

 

Windermere Foundation Gala attendees hold their bidder numbers in the air as they contribute to Raise the Paddle, collectively raising $520,250 in donations.

Image Source: Panravee Fernando – panraveephotography.com

 

In total, the Windermere Foundation Gala raised $1.6 million, catapulting Windermere towards its goal of reaching $50 million in total donations by the end of 2022.

To learn more about the Windermere Foundation, visit windermerefoundation.com.