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Unaffordable Utah: Mortgage rates climb again as buyers look for price reductions

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Leahy — housing market whiplash There are gains across the Beehive state as last year’s frenetic buying gave way to a slowdown and signs of a recession.

The National Association of Home Builders and Wells Fargo’s latest housing market index reveals that builder sentiment has fallen for the ninth straight month, entering recession territory.

“Buyer traffic is weak in many markets as more consumers remain on the sidelines. high mortgage interest rates Home prices are making the purchase of new homes financially impossible for many households,” said NAHB Chair Jerry Konter’s statement on the September index.

The September measure of builder confidence of 46 points is now the lowest level since May 2015 (excluding the start of the pandemic in spring 2020).

Conter added that 24% of builders nationwide reported lower home prices in September compared to 19% in August.

Utah housing market

“This recession is nothing like we experienced in the Great Recession,” said Jaren Davis, executive director of the Salt Lake Home Builders Association.

Davis said the pandemic’s housing boom is bad for builders because of supply shortages, soaring prices, labor shortages and delays.

“What the recession is trying to do is put us back in a healthier market,” he said.

Davis said builders need to keep building homes to keep up with Utah’s population growth.

“The demand side is still outpacing the supply side,” he said.

Shows homes for sale. August home sales were down nearly 24% year-over-year, according to a Utah Real Estate Association report.
Shows homes for sale. August home sales were down nearly 24% year-over-year, according to a Utah Real Estate Association report. (Photo: Aubrey Schaefer, KSL-TV)

August home sales fell nearly 24% year-over-year, according to the Utah Real Estate Association’s latest report. At the same time, the number of homes on the market soared by as much as 80% of his.

“Weak demand has been particularly acute for home builders, slowing sales and construction of new homes,” the report said.

Median home sales prices in Utah are still up 10% year-over-year, but the report expects price gains to moderate in the coming months.

The report blames inflation, rising interest rates and fears of a recession for the slowdown in trading.

Impact of mortgage interest rates

“The housing sector is definitely struggling right now. It’s shrinking,” Mark Bittner, senior economist at Wells Fargo & Co., said in an interview with KSL.

Mortgage rates have risen for the sixth straight week, according to FreddieMac. 30-year fixed-rate mortgages soared to an average of 6.7% as of last week’s major mortgage market survey.

“One of the problems facing builders is that interest rates have risen so dramatically in such a short time that many people who have contracted for a home suddenly find themselves unable to afford it. ,” said Vitner. “That’s why we’re seeing a surge in contract cancellations.”

You will see the streets of Saratoga Springs.  Mortgage rates have risen for six straight weeks, according to FreddieMac.
You will see the streets of Saratoga Springs. Mortgage rates have risen for six straight weeks, according to FreddieMac. (Photo: Aubrey Schaefer, KSL-TV)

Bittner said the spike in interest rates comes at the same time inflation hits families.

“More and more people are being priced out of the market,” he said.

FreddieMac’s research also found that mortgage rates vary widely, making it all the more important for potential buyers to obtain quotes from various lenders.

“Our research shows that borrowers can save an average of $1,500 over the life of the loan by obtaining one additional interest rate quote, and an average of about $3,000 if five quotes are obtained. It’s been done,” said Freddie’s Sam Cater in a prepared statement on September 8. Mac chief economist.

home buying roller coaster

The search for the best loans has benefited Utah County’s Peyton and Isaac Madsen.

“We lived in an apartment for a while, but we were ready to have our own house,” Peyton Madsen said.

In late summer 2021, they decided to dive into home ownership. At the time, the real estate industry was so competitive that bids had to be submitted just to secure land in Lehi.

“We loved it, we loved the place, so it felt right,” said Isaac Madsen.

Then, halfway through construction, they watched nervously as mortgage rates began to rise.

“It was overwhelming. Seeing them rise,” Peyton Madsen said.

When they signed the contract, the mortgage interest rate was less than 3%. By the time the townhome closed, the price had doubled.

Construction of a new home is shown in Lehi. Builder sentiment has fallen for the ninth straight month, according to the National Association of Home Builders and Wells Fargo's latest housing market index.
Construction of a new home is shown in Lehi. Builder sentiment has fallen for the ninth straight month, according to the National Association of Home Builders and Wells Fargo’s latest housing market index. (Photo: Aubrey Schaefer, KSL-TV)

Peyton Madsen said, “I was expecting an interest rate near 6%, which is insane and would completely push me out of my comfort zone where I was thinking of quitting and pulling out.”

“I think there were moments when I felt completely helpless,” added Isaac Madsen.

The Madsens decided to search over ten lenders until they found the right loan. They also asked for and got some concessions from the builders.

Peyton Madsen said, “We were able to find a much better rate, which was great.

Finally, I’m glad they didn’t give up on their dreams.

Isaac Madsen said, “I’m so glad I came here to have a family someday.

“We were able to make it work and I’m very grateful that everything went well through all this madness,” she added.

Buyers gain bargaining power

“It’s becoming a win-win market,” said Blair Frey, a real estate agent in the St. George area.

Frei said changes in the market have changed the dynamics for potential buyers who recently had no bargaining power.

“Sellers were basically getting whatever they wanted,” Fry said. “I’ve seen offers that are as crazy as delivering cookies every month or mowing the lawn. It was crazy.”

Now, he says, it’s the builders that are starting to offer incentives.

“We have reached out to realtors from multiple builders and have offered some pretty attractive incentives to buyers,” says Frei.

A home under construction is shown in the St. George area. Real estate agent Blair Frey said changes in the market have changed the dynamics for potential buyers, who have recently lost their bargaining power.
A home under construction is shown in the St. George area. Real estate agent Blair Frey said changes in the market have changed the dynamics for potential buyers who have recently lost bargaining power. (Photo: Aubrey Schaefer, KSL-TV)

In one transaction, I helped a family pay $12,000 in closing costs.

“We were able to enter a home they loved in an area they loved without competition, place an offer, and have the seller cover all closing costs,” Frye said. I got

Frei said there is still room for price cuts and these home sellers are still well positioned because they hold all the stock they have amassed over the past few years.

He said another tactic buyers can use is to use allowances or markdowns to lower mortgage rates.

Recent Utah housing situation

Rudd Egan

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