Utah ranks in the top 10 most “difficult” states for first-time homebuyers, with an average of over $70,000 in cash needed up front for a down payment.

That’s according to a new list released by the finance site Moneywise, which ranked all 50 states based on the median price of homes using data from Zillow and the average down payment percentage of 13%, according to the National Association of Realtors.

Utah has the sixth highest down payment requirement with an average of $70,832 and a median home value of $544,868, according to the Moneywise ranking.

Why is housing so expensive in Utah?

The Beehive State is still nowhere near as expensive as states like Hawaii or California, but it’s likely near the top of the list due to its extraordinary home price increases after COVID-19 opened up remote work opportunities, which spurred a home buying frenzy across the nation, especially in the West.

Home prices in Utah’s most populated county, Salt Lake County, jumped nearly 60% from March 2020 to May 2022, during the height of the pandemic housing rush.

In May of last year, the median price of a single-family home in Salt Lake County peaked at $650,000, but since then, price increases have slowed and even tipped downward as the Federal Reserve’s fight with record levels of inflation pushed borrowing rates higher.

The West, even though it saw some of the sharpest home price increases during the height of the pandemic craziness, has also been ground zero for the home price correction.

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In February, the median single-family home in Salt Lake County fell to $560,000, down $90,000 from its May 2022 peak, according to the Salt Lake County Board of Realtors.

That’s still a hefty price to pay, especially for first-time homebuyers who don’t have any equity from a previous home purchase to apply to a down payment.

Combine that with today’s higher interest rates, and first-time homebuyers are facing serious affordability problems, even in states like Utah that are relatively more affordable than other states in the West, like California and Washington.

Compared to the sub-3% mortgage interest rates some buyers enjoyed in 2021, they are now facing rates over 6% for the typical 30-year mortgage, though that’s down from the over 7% rates seen last fall.

During that time, those rates priced out over 75% of Utahns from being able to afford the state’s median priced home in late 2022, according to estimates by Dejan Eskic, a senior research fellow at the University of Utah’s Kem C. Gardner Policy Institute.

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Faced with Utah’s affordability problems and a stubborn 31,000-unit housing shortage, state lawmakers attempted to tackle the problem through a number of measures passed earlier this year, including a new program to help first-time homebuyers get into newly constructed homes.

SB240, which takes effect July 1, uses $50 million in state money to offer an up to $20,000 loan to eligible Utahns to help them buy new homes, whether that’s for down payment assistance, closing costs or buying down interest rates. State officials estimate it will help about 2,500 buyers.

To qualify for the loan, the single-family home, condo or townhome must be newly constructed and cost no more than $450,000. State lawmakers opted to keep the program narrowed to new home construction only, arguing it will help drive the state’s housing stock upward and, hopefully, help make a dent in Utah’s housing shortage.

Most expensive states

Here’s how the top 10 states that require the biggest downpayment rounded out in the Moneywise ranking:

  1. Hawaii: median home value of $848,926 with an average 13% down payment of $110,360
  2. California: $760,800 with down payment of $98,904
  3. Washington: $595,732 with down payment of $77,445
  4. Colorado: $559,838 with down payment of $72,778
  5. Massachusetts: $559,312 with down payment of $72,710
  6. Utah: $544,868, with down payment of $70,832
  7. Oregon: $502,215 with down payment of $65,287
  8. Idaho: $466,435 with down payment of $60,636
  9. New Jersey: $441,762 with down payment of $57,429
  10. Nevada: $434,832 with down payment of $56,528.16

Most affordable states

In contrast, Moneywise ranked West Virginia as the best state for first-time homebuyers with the lowest average down payment requirement of $16,783 and an average Zillow home value of $129,103.

Next came Mississippi, with an average down payment requirement of $20,517 and an average Zillow home value of $157,828. Arkansas ranked No 3, with an average down payment requirement of $22,082 and an average Zillow home value of $169,867. 

Here’s are the top 10 states where first-time homebuyers have the smallest down payments:

  1. West Virginia: median home value of $129,103 with an average 13% down payment of $16,783
  2. Mississippi: $157,828 with down payment of $20,517
  3. Arkansas: $169,867 with down payment of $22,082
  4. Oklahoma: $171,057 with down payment of $22,237
  5. Iowa: $183,418 with down payment of $23,844
  6. Kentucky: $188,439 with down payment of $24,497
  7. Alabama: $194,695 with down payment of $25,310
  8. Kansas: $198,199 with down payment of $25,765
  9. Ohio: $199,959 with down payment of $25,994
  10. Louisiana: $205,972 with down payment of $26,776
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