Mortgage costs are up $1,000, yet Salt Lake homes still selling in just 5 days

SALT LAKE CITY — Home price increases continue to be mind-boggling while high mortgage rates are only starting to cool the market, according to the latest spring data on Utah and the nation's housing market.

But that doesn't mean prices are about to drop anytime soon — so don't think there's a 2006-like bubble about to pop.

Here are some of the top takeaways from today's housing landscape, both here locally and nationwide:

What's happening in Utah

• The median price of a single-family home in Salt Lake County went up to $630,000 last month, up 22% from April 2021, according to the Salt Lake Board of Realtors.
• Price increases continue upward for not just single-family homes. The median price for all housing types in Salt Lake County was $550,000 in April, up 26% year over year.
• The typical Salt Lake County home is still selling after only a median of five days on the market — same as this time last year.
• In the Salt Lake City metro area, rising mortgage rates have pushed the cost to finance a home up nearly $1,000 from a year ago. The monthly payment on a typical home is now $2,583 on a 30-year mortgage with a 20% down payment, which is $992 higher than this time last year, according to Zillow estimates.
• And buyers continue to pay beyond asking prices. In the Salt Lake market, 66% of homes sold for above their list price in March, which is Zillow's latest available data.

The U.S. market

• Nationwide, U.S. home values continue to grow at record pace, up 20.9% in the past year, according to Zillow's April housing report released Thursday.
• The combination of rising prices and a spike in mortgage rates means the monthly mortgage payment on a typical home is 52.5% higher than it would have been a year ago, Zillow reports.
• Still, rising costs have not yet eased competition. "Homes are selling as fast as they ever have — after only seven days for the typical home — and nearly half of homes are selling for above their list price," wrote Nichole Bachaud, Zillow's market analyst.
• However, there are signs that the U.S. market is starting to "rebalance," including a growing inventory and a rise in listings that have seen price cuts. Zillow economists expect the market to begin to cool this spring as rising costs sideline enough would-be buyers long enough for inventory to begin catching up with demand, "but it has not yet reached that point," Bachaud wrote.
• Also signaling what RE/MAX called in its latest housing report a "flattening of the seasonal spring ramp-up," home sales last month increased less than 1% over March and dropped 12.8% year over year across all of the report's 53 metro areas.
• That, combined with an 11.5% boost in new listings from March to April, resulted in a 24% surge in U.S. inventory month to month, according to RE/MAX.
• Nationwide, the median sales price of the U.S. home was $420,000, up 3.4% over March and 15.1% over April of last year, according to RE/MAX.

What does a 'cooling' market mean?

As housing market watchers see national headlines about U.S. home sales cooling amid high interest rates , many are probably asking, does this mean a bubble is about to pop or prices are about to go down?

Not so fast.

Remember, today's housing market is not the same as what happened in 2006, 2007 and 2008, when risky lending practices combined with an overbuilding of housing led to the subprime mortgage crisis and the global collapse we all know as the Great Recession.

Experts today say they do see signs of a new type of bubble forming as U.S. home prices break away from market fundamentals — but experts say demand is real, especially for high-growth areas like the West and Utah that are grappling with housing shortages.

So when economists say the market is "cooling," that only means scarce inventory and high mortgage rates are causing would-be buyers to turn away and are no longer part of the housing market frenzy that launched amid COVID-19.

"In the big picture, it's still a strong housing market, with sales happening quickly and demand easily outpacing supply," said Nick Bailey, president and CEO of RE/MAX.

"We're starting to see a cooling in sales, which isn't surprising given the record results of 2021 and the recent rise in interest rates. That should create more balance over time, countering the frenzied seller's market we've had for so long," Bailey said. "Driven by generational demand, rising rental costs and still relatively low interest rates, 2022 could still rank as one of the best years in the past decade."

When will prices go down?

Utah is not immune from what appears to be the beginning of a cooldown. Sales slowed down again in April — which was the 11th consecutive month year over year, Dave Anderton, spokesman for the Salt Lake Board of Realtors, told the Deseret News on Friday.

"Sales were down 16%, and I think that's due to the 5% interest rates, to the higher prices, so we're hearing people can't qualify now, " Anderton said. The jump from 3% rates to now over 5% means "hundreds or thousands" more for mortgage costs per month.

"So I think the high prices and the high mortgage interest rates are catching up and making a lot of people pull back. They just can't afford it," Anderton said.

As sales have fallen, Salt Lake County housing inventory "creeped up" by about 3% in April. "That's not a huge increase," Anderton said. "But it's not down. We've been used to seeing it down."

Eleven consecutive months of falling sales aren't something Anderton has seen since the Great Recession.

Some sellers — not all — are starting to drop their prices slightly, but that's not yet being reflected in the housing data, Anderton said.

So will that start to have an impact on prices?

"Oh yeah, it will," Anderton said. "If we have 18 months of falling sales, and we're at the year mark now, you're going to see prices start to taper a bit."

Maybe then Utah won't keep seeing price increases as big as 25% year over year. Just in the last two years, Salt Lake-area home prices have gone up a striking 50%, according to the Salt Lake Board of Realtors.

"It hasn't slowed yet, which is scary. We might see another year of price increases," Anderton said. "But the interest rate hikes and the falling sales tell me that we're about to turn a corner."

But that doesn't mean prices are going to "crash," Anderton said, especially as Utah continues to see a housing shortage amid its booming economy and population.

"I don't think (prices) will significantly drop unless we start seeing massive layoffs, like we did in the Great Recession," Anderton said. "When people start losing their jobs and then they're out of work, then we see home prices drop. But right now the job market's pretty good. The best it's been in a long time."

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