Utah Mortgage Demand Soars as Other Once-Hot Markets Flounder
Home shopping in Salt Lake City, Nancy Cygan is between two worlds.
Her house in the Chicago suburb of Roselle, listed at $369,900, has been shown only once since May, despite its moderate price and proximity to an airport and train stop. Then there’s Utah.
“I never thought, leaving Chicago, that I would not be able to afford something comparable in Salt Lake City,” Cygan said Wednesday as she scouted homes with her sister, a Utah real estate agent.
How drastic are the changes? Three years ago, the Utah housing market was the weakest in the nation.
Today, it is second only to Idaho.
Home prices in Utah rose 17.4 percent during the three-month period ending September 30 compared to a year ago, according to the Salt Lake Tribune, a jump boosting the state from 10th to second best nationwide. In addition, three Utah cities - St. George (9), Salt Lake City (10) and Provo-Orem (18) - made the top 20 list of metropolitan areas.
Nationally, year-over-year home prices rose at a much slower rate of 7.7 percent, reflecting a slowdown in markets that grew too fast. California mortgage demand, for example, has tumbled as prices declined in more than half its cities.
The numbers, which measure average house price changes in repeat sales or home equity loan refinancing of the same single-family properties, help housing economists estimate changes in the rate of mortgage defaults, housing affordability and other data pertaining to specific geographic areas.
When appreciation soars, as it has in Utah, those renting are the biggest losers, forced to pay more with none of the benefits of ownership. And homeowners, even those not looking to sell, benefit. That’s because as a home appreciates, so does the owner’s sense of wealth, which inspires additional confidence and spending.
In which case, Utahns were not feeling particularly confident during the early part of the decade, when the state missed out on the housing boom that occurred in states such as Arizona and Nevada. It was only a matter of time before Utah caught up, but going from dead last to No. 2 is amazing.
“People have been cashing out in places like San Diego and Phoenix and going to Boise, Salt Lake and Twin Falls where they can get twice the house for half as much money,” said Salt Lake City economist Jeff Thredgold. “But someone in Austin or Atlanta would be stunned at what they would have to pay to live in Salt Lake City.”
Utah mortgage costs remain low, and St. George, Salt Lake City and Provo-Orem all climbed the list of highest home appreciation. It’s making those who own now rich, and those looking to buy struggle.
“I was like, ‘Whoa, are you kidding me?’ There were these bungalows and they were cute, but they were teeny. We finally upped our price range,” said Jeremy Pugh, an arts editor at the Logan Herald who landed a job at Salt Lake Magazine and started scouting for a home in Sugar House.
They sold their home in Logan for $140,000 and paid $260,000 for a 1914 Victorian in Sugar House, meaning steeper bills and no more prepayments - at least for the foreseeable future.
“We now have twice the house payment for a smaller home,” Pugh said. “We bought high, basically, and we’re just hoping our value will continue to appreciate.”
Don’t count on it, says real estate agent Bob Plumb. The market already is softening, and while some of the slowdown is seasonal, sellers aren’t as brazen as they were six months ago.
“Sellers used to just add 5 to 10 percent onto the value and get it. Now pricing is a little more critical.”