Owning a home in Utah has become a pricy endeavor, thanks to the dramatic surge in housing prices in recent years. The real estate website, Agent Advice, recently unveiled a report shedding light on this trend. Their analysis, spanning from March 2021 to March 2023, showcased the fluctuating and unpredictable nature of the national housing market, with Utah standing out for its costly homes.
Utah clinched the sixth spot as the priciest state for homebuyers, boasting an impressive average home price of $506,072 this past March, based on insights from Agent Advice’s meticulous analysis. Their ranking methodology centered around the interplay of price hikes and percentage surges spanning three years.
The Post-Pandemic Housing Hangover
The pandemic set the stage for a whirlwind escalation of housing prices, only to see them plateau or even plummet in several regions recently. The West, known for its sizzling housing market, felt this the most as the Federal Reserve locks horns with rampant inflation.
Zooming into local trends, data from the Salt Lake Board of Realtors reveals a fascinating storyline. Utah’s housing prices hit rock bottom this winter, only to rebound with gusto. In the vibrant heart of Salt Lake County, the median sticker price for single-family homes soared to $600,000 in June, marking a robust 12% surge from January’s low of $535,700.
Despite the volitility, Utah found its name among classic contenders like Hawaii, California, and Washington, But Massachusetts and Colorado also claimed the other top five spots for the priciest homesteads.
Top 10 Priciest Places in the US
Here’s a little bit about each of the rather eyewatering top 10:
1. Hawaii: Topping the charts is Hawaii, boasting a hefty average house price of $834,583. Agent Advice points out, “The ‘Aloha State’ has always been pricey, but current rates are 146% above the national average of $338,649. This is a staggering 25% jump since March 2021, saddling home buyers with an extra $166,777, the steepest monetary leap in the US.”
2. California: Bearing an average home price of $728,134, it’s a challenging 115% above the national average. “Despite its allure, California’s housing market has seen a concerning $95,228 rise between March 2021-March 2023,” says Agent Advice. But not all seems well; prices experienced a dip by $18,573, or 2.5%, from March 2022 to March 2023.
3. Washington: Homes here carry a typical tag of $562,936, a hefty 66% above the national average. While there was a $72,533 price jump since March 2021, Agent Advice also notes a downward trend with a decrease of $17,938, or 3.09%, between March 2022-March 2023.
4. Massachusetts: This state isn’t far behind with an average house price of $558,313, a worrisome 65% over the national figure. While there’s been a $54,476 increase from March 2021 to March 2023, Agent Advice points out that “prices were alarmingly high even before 2021.” The past year saw a slight decline of $1,050 or 0.19%.
5. Colorado: Homes here sport an average price of $539,640, a daunting 59% above the national rate. “Colorado’s figures have swelled by $82,504, yet, echoing Massachusetts, the last year saw a dip by $1,527 or 0.28%,” reveals Agent Advice.
6. Utah: With an average home rate of $506,072, Utah stands a considerable 49% above the national benchmark. Prices have spiraled by 20% or $86,071 since March 2021. Still, the state faced a slide by $10,849 or 2% between March 2022 and March 2023.
7. Oregon: Homes come with an average tag of $485,475, a challenging 43% over the national rate. Property values here have risen by $56,730 or 13% between March 2021 and March 2023. Yet, there’s been a drop by $11,998 or 2% from March 2022 to March 2023.
8. New Jersey: Here, the typical home value stands at $451,559.
9. Idaho: With an average home price of $435,374.
10. New Hampshire: Homes typically cost about $429,421.
Where Salt Lake City Sits and Why
Despite, or perhaps because of, its position on the top 10, Salt Lake City stands on shaky ground. It’s been identified as having the highest vulnerability for a home price downturn in the U.S. based on a fresh report from the esteemed investment research firm, Morningstar.
Researchers at Morningstar have observed that, despite Salt Lake City experiencing a moderate increase in its population, its housing market has drastically shifted. The city has transformed into one of the least pocket-friendly markets. Even more concerning, listings available for purchase have grown by a substantial 50%, and the duration homes remain on the market has soared, marking a 300% increase from the previous year.
Morningstar’s Methodology and Findings
Morningstar, in its endeavor to gauge the risk of home price corrections or potential declines, harnessed data from sources such as the Atlanta Federal Reserve, the U.S. Census Bureau, and Zillow. Using this data, they crafted a metro-level home price risk assessment tool. The tool identifies metro regions that are grappling with poor housing affordability, dwindling population numbers, and an escalating volume of properties up for sale, along with an increase in the length of time they remain unsold, as the ones most vulnerable to price adjustments, as detailed in their study.
While Morningstar’s analysts don’t anticipate a massive downturn like the one witnessed during the Great Recession, they do forecast a dip in national home prices. As cited by Fortune, there’s an expected decrease ranging from 4% to 6% off their apex, likely to manifest around 2024.
The contemporary housing market exhibits a certain robustness due to a multitude of factors, as observed by Morningstar’s team. Chief among these are the locked-in interest rates, stringent lending standards over the past ten-plus years that mitigate foreclosure threats, and a notable deficit in the U.S. housing inventory, estimated to be around a shortfall of 2.5 million units. Nonetheless, the researchers contend that the heightened enthusiasm of buyers during the pandemic, fueled by extraordinarily low borrowing costs, has escalated housing prices to unsustainable highs in certain regions.
Other Pricey Utah Cities
Two more metropolitan areas in Utah – Provo and Ogden – also found themselves in the top 15, facing a significant risk of home price correction. They share this dubious distinction with other metros like San Diego, Austin, Colorado Springs, Nashville, Oxnard, Seattle, Denver, Portland, San Jose, Honolulu, Los Angeles, and San Francisco.
By way of contrast, Morningstar’s research pinpointed 15 metropolitan regions, primarily located in the East, that exhibit the most resilience against potential price corrections. These are: Hartford, Syracuse, Allentown, New Haven, Harrisburg, Rochester, Augusta, Toledo, Little Rock, Wichita, Baton Rouge, Akron, Cleveland, Scranton, and Virginia Beach.
2022 Housing Market Compared to 2023
This isn’t the first instance where major cities in the West have emerged in discussions around vulnerable housing markets. In the previous year, when the U.S. housing scenario underwent a shift, triggered by soaring mortgage interest rates and the Federal Reserve’s battle against unprecedented inflation, it was the West that bore the brunt, feeling the initial and most potent impact.
In the recent spring season, the U.S. housing market navigated through a changed landscape, marked by interest rates that fluctuated persistently between 6% and 7%. The consequence was a rather subtle nationwide home price adjustment, which saw a decline of just 2.4% in April from its zenith in June 2022. Yet, a closer inspection paints the picture of two distinct housing scenarios. The Eastern cities have experienced slight upward movements in prices, while the West has confronted sharper downturns.
During the previous summer, homeowners in locations such as Boise, Denver, and Salt Lake City felt compelled to reduce their asking prices. This decision came in the wake of an extended period, spanning over two years, of surging home prices. This trend was largely influenced by the COVID-19-induced housing surge, which led to a mad scramble among buyers. This was particularly evident in the West, where factors like lower interest rates, the flexibility of remote work, and a reduced cost of living lured people away from the major urban centers. In this context, Moody’s Analytics highlighted cities in regions like Idaho, Arizona, and Utah as potentially being priced higher than their intrinsic value, indicating an overvaluation, as the nation’s housing market transitioned into a corrective phase.
The Correction Debate
Housing experts were unanimous in predicting a price correction for Utah’s housing market as 2023 approached. Yet, the depth of this correction stirred some discussions. This uncertainty was due to Utah’s characteristics of rapid growth, a robust employment landscape, and an enduring housing shortage, factors which could potentially sustain high housing prices over the long haul.
The housing statistics for the Salt Lake City metro region have certainly been eye-catching. Among various U.S. housing markets, this area witnessed some of the steepest annual dips in home sales, as detailed in RE/MAX’s National Housing Market Report for May, which took into account 51 metropolitan regions. Local figures mirrored this trend, revealing stark price reductions. For instance, come April, the average price across all housing categories in Salt Lake County plummeted to $495,000, marking a 10.8% drop from the previous year. The Salt Lake Board of Realtors indicated that the median price for standalone homes stood at $577,000, a decrease of nearly 9% from the previous year’s $633,000 in the same month.
Yet, as summer drew closer, there was a noticeable revival in home sales. Despite a scanty inventory due to many homeowners clinging to their advantageous interest rates, the momentum of housing transactions in the Salt Lake vicinity began to grow. Even if sales figures for May were lesser than the previous year, they marked a 10.6% surge from April, as highlighted in RE/MAX’s report for May.
Furthermore, while the annual comparison indicates lower prices, a month-by-month evaluation from the winter season portrays a gentle price surge. The median pricing of $577,000 for standalone homes in Salt Lake County in fact showcased an almost 8% jump from January’s $535,750, as reported by the Salt Lake Board of Realtors.