2022 President, Northern Wasatch Association of Realtors
As home buyers navigate the challenges of high inflation, rising interest rates and expensive prices, some are wondering what’s in store for the housing market for the rest of the year.
Lawrence Yun, chief economist of the National Association of Realtors, had some predictions when he spoke to Realtors at a May conference. He believes there will be fewer home sales and slower price growth with the market returning to pre-pandemic conditions rather than the home-buying frenzy of the past two years.
Because of higher prices — up 55% from last year when accounting for more expensive interest rates — Yun is forecasting a 9% decline in U.S. home sales. Yun also predicts the continued housing shortage is likely to keep home prices high, but with growth at a slower rate. Yun predicts home prices will increase 8% in 2022 — down from a 17% gain last year.
“This means that we may be dealing with unit sales activity down to pre-COVID days,” Yun said. “We had a huge surge; now we’re retreating back to pre-COVID days. Prices are still high; they are not retreating. … Then by 2023 sometime, with job creation, home sales may return to positive territory.”
Similar trends may also be shaping up in Northern Utah as sales have declined somewhat, but prices are still on the rise.
For the first four months of the year, Weber County sales activity was about even with 2021 although there was a 6% drop in April. The median price for the year is up 30% to $424,449.
In Davis County, sales are down 6% year to date and 4% in April. The median price of $525,000 is 28% higher than a year ago.
In Morgan County, which has fewer transactions, sales increased 74% for the year and 29% in April. Prices were up 22% to $695,000.
For those who are worried about a housing bubble, Yun pointed out that mortgage balances aren’t rising, consumers don’t have excessive housing debt, and the market justified the previous increases in housing prices.
“Some of the demand will taper off just because we are in a rising interest rate environment, but the price increases certainly have been justified by the excessive demand and [lack of] supply,” Yun said.
While Yun said he expects more housing inventory as builders complete more product, it won’t completely solve the U.S. housing shortage, which he said isn’t going away anytime soon.
“After the over-production [of homes during the mid-2000s], we had under-production for almost 15 straight years,” Yun said. “So, the cumulative effect of under-production for 15 straight years is falling inventory, falling inventory, falling inventory.”
In Northern Utah, the inventory situation improved slightly in April as Weber and Davis counties had the number of homes for sale jump 51% and 43% respectively. Meanwhile, the number of Morgan County listings doubled.
Still, competition for homes is high with only one month of supply in Davis and Weber counties and about two months in Morgan County. A normal market has about six months of inventory.
Competition will also remain steady as first-time buyers and a large number of job openings support real estate.
“Even if there’s a recession, it looks like job creation will continue, which is important for the housing market,” Yun said.
That’s particularly good news in Utah where we have the best job creation in the nation at 5.3%.
To learn more about the unique real estate conditions in your neighborhood, contact a local Northern Wasatch Realtor. Find one who specializes in your area by searching the online directory at NWAOR.com.