With only two weeks left in 2023, Utah real estate agents are already being told to look to 2024 for things to look up.
Hundreds of them burst into slow nervous laughter Friday when one of the state’s top housing economists offered advice after delivering a series of forecasts of further interest rate hikes, decline in home sales and other dark markers this year.
“Just hang in there,” Jim Wood of the University of Utah’s Kem C. Gardner Policy Institute told them as they gathered for an annual review of their crystal ball. “2024 will be better.”
Historically wild swings in housing markets that began with the COVID-19 pandemic and have continued since wreaks havoc alongside the state’s longstanding housing shortage still have a few more quarters to go, Wood and other economists added — at least.
Here’s some of what they say to expect:
• Utah is unlikely to experience a recession, although the big job gains it has enjoyed will likely slow.
• House prices are falling compared to their big surge since 2020 – and almost a decade before that, for that matter – and they will likely continue to decline for much of this year. But sustained declines amounting to a housing bubble are, in Wood’s words, “extremely unlikely.”
• Future mortgage rates? Projections range between 5% and 9% by the end of 2023, with the prevailing sentiment being between 6.5% and 7.5%. Days below 3% can disappear for a lifetime.
Home sales in the five-county region centered on Salt Lake City will be down sharply for 2023 and for the country as a whole, forecasters agreed. This is depressing news for many home buyers, real estate agents, mortgage and title industries and home builders.
But unlike the Great Recession, employment in the state remains strong, with the unemployment rate now at 2.2%, the lowest in the nation. Tech companies and Wall Street can be dismiss workerssaid Lawrence Yun, chief economist and senior vice president for research at the National Association of Realtors, but in Utah, “there are real Job creation.”
The Salt Lake Chamber said this week that November marked the 21st consecutive month that unemployment in the state had fallen below 3%. Derek Miller, its president and CEO, said in a statement that Utah remains “a safe haven for businesses with good governance and sound policy in a global slowing economy.”
How this housing cycle is different
For housing, it also means landlords don’t lose their salaries en masse like they did in the housing crash of late 2007 to 2009. These days, Yun said, instead of the housing glut which swamped the economy 15 years ago, Utah and the United States “already had a housing shortage before COVID, and it just got worse during the COVID housing boom.”
Beehive State, in particular, is grappling with a severe shortage of affordable housing for sale and rent, and housing is likely to be one of the top issues for the 2023 Utah Legislature as it convenes. general next Tuesday.
Utah homebuilders, meanwhile, have significantly slowed their torrid pace of housing starts and new developments from just a year ago. According to the state’s latest economic report, permits for single-family homes have fallen 32% below where they were last year, the biggest drop since 2008.
However, Yun said, rents, which have also been rising in Utah at a historic rate, could start to slow in 2023 as a wave of newly built apartments connect yourself.
We have a global pandemic, stimulus spending, busted supply chains and a war in Ukraine all fueling the inflation that has led to the rate hike, the nearly 1,000 real estate agents gathered in Salt Lake City Hotel Grand America have been said. Many said the annual forecast sets a daunting tone for the year ahead.
Gary Cannon, a seasoned broker and founder of Cannon & Company Real Estate Services in western Jordan, praised his fellow agents for their passion and resilience, but joked that a relatively unchallenging era of residential sales was over.
“It’s nice to see all those faces again,” Cannon said, “working after five or six years of paid time off.”
Sellers are ‘waiting for the dust to settle’
Home prices in Salt Lake County have fallen slightly each month since May, after jumping about 25% from a year earlier and nearly doubling in the past five years. The median selling price of single-family homes, condominiums, townhouses and combined duplexes in the county fell to $485,829 in December from $565,600 in May when the Federal Reserve launched its attack on the surge of inflation.
So that’s a good sign for those hoping to buy, but they’ve seen their potential monthly payments almost double over the same period. Pinch hardest in this trend: young first-time buyers. Many would-be sellers, at the same time, cling to their home base, elated by these recent price increases and wary of what lies ahead.
“They step back and wait for the dust to settle,” Wood said Friday. “We’ve led the country in price increases, so it’s time to take a breather.”
When it comes to the prospect of tipping into a recession, the current real estate cycle offers a more nuanced picture than past downturns. Utah’s many attractions, its niche as a relatively cheaper destination state for those fleeing the big cities – and its strong economic rebound since the pandemic – will likely insulate it, economists said, if a national slowdown occurs.
“Our official forecast for the state does not point to a recession in 2023 or 2024,” said Wood, who nevertheless acknowledged that he “was more optimistic” than many of his counterparts.
Yun also expressed his optimism — for 2024 and beyond. utah saw its biggest wave of non-residents moving in since World War II last year, and the national economist said the data suggests “more people will settle in the region in the future, for better or for worse”. Among other effects, this will support domestic markets in the long term.
“The price predictions for this year are uncertain,” Yun added, “but 10 years from now, the winners will be the people who brought a property.”