Due to the increase in interest rates last year, prices have steadily drifted downward since May. In May of 2022, average prices were 23% higher than in May of 2021, but in December 2022 the average prices were almost equal to those in December 2021. Prices climbed from January and returned to where we started from by the end of 2022. I expect prices will continue to drift lower until we are about 15-20% lower than in May which means we have another 5% to fall. Once we complete the 20% decline the cost of a mortgage will be mostly adjusted for in the price of the home.
The current prices only represent about a 10% decline in prices when you compare “apples-to-apples”. The lower average price is due to sales that have shifted to smaller properties resulting in the incerased change in the average. In other words, people who had planned to buy a single Family Home settled for a townhome, etc.
One of the biggest factors in our market for the next few years is the fact that many homeowners are “locked-in” with their current mortgage. In Utah, of existing mortgages:
33% have an interest rate Lower than 3%
46% have an interest rate between 3% and 4%
15% have an interest rate between 4% and 5%
This means that roughly 94% of mortgagors in Utah are going to have a hard time deciding to trade their cheap mortgage for much more expensive money, so many will not move. Since rates are predicted to hover in their current range for a few years (according to UofU economists) there will be much less movement in the overall market as people decide to stay with their current home due to the much lower payment.
Demand will remain high because Utah still does not have enough housing. There are various estimates of how many additional units we need, but we are several years away from meeting the demand.
The only thing that will cause a major decline in prices is if we have a significant number of layoffs in the area. Barring a major economic downturn, I think that we will be in a state of stagnation of property values and very little turnover for the next few years.
There may be some limited opportunities in 2023 in higher end homes since there are more “sophisticated” (dangerous) loan products on some of those homes. Those loans are fairly rare and in order for a “deal” to emerge, the bad loan product will have to coincide with a personal reversal.
The bottom line is that if you want to make a move for your own reasons you should do it! There is no reason to be in a hurry, and likewise no real reason to put off a change if it is the right thing for your family. I think it is a mistake to wait for a major downturn and an equally bad mistake to rush into a move that isn’t right.