U.S. home prices fall for first time in 3 years — but not in this Utah city
While the rest of the nation is seeing drops in the housing market, Salt Lake ranks No. 2 in the nation for home price increases from June to July
Across the U.S., home prices declined 0.77% from June to July, marking the first monthly decline in nearly three years.
That’s according to Black Knight, a mortgage software, data and analytics firm, CNBC reported Wednesday. While the price drop is slight, it’s the largest single-month decline since January 2011, and marks the second-worst July for home prices dating back to 1991.
“We’ve been advising for quite some time that the dynamic between interest rates, housing inventory and home prices was untenable from an affordability perspective, and at some point, something would have to give,” Andy Walden, vice president of enterprise research and strategy at Black Knight, told CNBC.
“We’re now seeing exactly that, with July’s data providing clear evidence of a significant inflection point in the market,” he added. “Further price corrections are likely on the horizon as we move into what are typically more neutral seasonal months for the housing market.”
Meanwhile, however, the Salt Lake City area remained the second-highest metro in the nation for home price increases from June to July, even as most major metros in the West saw price month-to-month decreases, according to an analysis released Tuesday by the Utah Foundation.
“This is unusual for the West, given that eight of the 10 metros with the largest decrease in appreciation are our western neighbors,” the report notes.
Interesting analysis from @UtahFoundation, showing Salt Lake remains second highest in the nation for home price increases from June to July — while prices across U.S. are either beginning to flatline or, according to some sources, declining #utpolhttps://t.co/cXGuNvymjt pic.twitter.com/cE6chvhfFT— Katie McKellar (@KatieMcKellar1) August 24, 2022
Salt Lake City home prices increased 3.2% from June to July, second only to Providence, Rhode Island, with 3.5%, according to the report.
The cities with the biggest declines were San Jose, California, with -3.9%, and Seattle with -2.7%.
Utah Foundation’s analysis, using data from Redfin, Freddie Mac and AEI Housing Center, differs from Black Knight in the sense that it reported home prices in the 50 largest metro areas saw prices increase from June to July, “but just barely at 0.5%.”
But Black Knight’s data is already foreshadowing what Utah Foundation’s report said is likely around the corner if not already here. “Month-to-month metro prices are expected to dip into negative territory in August and September, and some sources show that housing prices are already negative nationally.”
It’s the latest temperature reading on a national housing market that’s cooled rapidly as the Federal Reserve continues to wage its war on inflation. The Fed increased interest rates four times in the past five months, and mortgage rates are the highest they’ve been since 2009, Utah Foundation notes. Before rates started rising, U.S. home price increases peaked in March at 17.3% year over year and have since dropped to 13.7% by July.
In Utah, local housing sales data showed the state’s median home price actually dipped in June to $530,000, down slightly from $535,050 in May.
Dejan Eskic, a senior research fellow at the University of Utah’s Kem C. Gardner Policy Institute and one of Utah’s leading housing experts, said that this shows Utah’s housing market is finally “stabilizing” after two years of a “frenzied market” that’s battered buyers competing with dozens of other offers that were often tens of thousands of dollars above asking price.
While flatlining or dropping home prices might be welcome news for buyers, the market is stabilizing at still record-high home prices, and housing experts predict they’ll stay high because Utah continues to face a stubborn housing shortage of now at least 31,000 units, according to a recent report written by James Wood, an Ivory-Boyer senior fellow at the University of Utah’s Kem C. Gardner Policy Institute.
While other housing markets in the West cool rapidly, especially in Idaho, Utah is not immune. However, its high home prices are likely to persist due to the state’s rapidly growing population — which was driving up home prices even before the pandemic housing frenzy hit — as well as the state’s historically strong job market, compounded with its housing shortage.
Meanwhile, higher mortgage rates hover above 5% these days tempering demand somewhat, but they’ve also aggravated the housing affordability crisis and priced out a staggering 70% to 75% of Utahns, according to Eskic’s calculations