Housing experts disagree on Utah home price declines in 2023

Housing experts disagree on Utah home price declines in 2023

Looking ahead to 2023 and what it will bring to the housing market, two of Utah’s leading housing experts respectfully disagree with each other.

Although they both agree that the market is in the midst of a price correction after two years of runaway demand amid the pandemic real estate frenzy, they have different perspectives on the extent of this price correction l ‘next year.

The researchers — Jim Wood and Dejan Eskic, both of the University of Utah’s Kem C. Gardner Institute — had a friendly debate Friday at Ivory Homes’ annual private gathering of hundreds of homebuilders and other industry partners from across the state. The discussion between Eskic and Wood was moderated by Clark Ivory, CEO of Ivory Homes, which is Utah’s largest homebuilder.

The list of speakers all sought to bring clarity to a market they said was largely characterized by “volatility” and “uncertainty” as mortgage rates, hovering around 7% on some days, pressed buyers and quickly ended what had been more than two years of a hot market.

Housing Market Forecast 2023

Neither Wood nor Eskic are predicting a catastrophic crash, like the one in 2007, that sent the global economy into the Great Recession. They are both confident that Utah’s job market is strong enough to avoid massive foreclosures and that housing demand will continue due to the state’s rapid growth and widespread housing shortages.

However, they expect the market to enter a correction that will continue through 2023 thanks to aggressive rate hikes by the Federal Reserve to fight inflation. They say this will pose challenges, especially for homebuilders, but will also rebalance a market that costs about two-thirds of Utah residents at median home prices.

Big Willow Creek Estates homes are under construction in Draper on Friday, November 11, 2022.

Laura Seitz, Deseret News

The question is how far will this correction go and what will it mean for house prices in 2023? This is where it gets hard.

“I call it the ‘big debate,'” Ivory said.

How much will Utah home prices drop?

Eskic has a more bearish outlook. He predicts Utah home prices will drop 9% year-over-year in 2023. From peak to trough, with the peak being May 2022, he expects prices to fall by a percentage somewhere between the mid to low teens, depending on what happens with interest rates over the next few months.

So far, home prices in Utah are still up year over year, but have so far fallen more than 9% from their peak in May, according to Eskic.

“When we look at where we peaked earlier this year, I think we’ll start to see negative year-over-year readings in late winter, early spring,” he said. said Eskic.

Wood said he was “a bit more optimistic,” predicting minor issues that will stabilize in the green after just a few quarters.

“I think buyers will adjust, on the one hand,” Wood said, pointing to a chart he said showed “it’s very rare in Utah for housing prices to go down.”

“We still have a deceleration in the rate of increase as the cycle unfolds. But having price cuts is really unusual,” Wood said. He noted that in the early 1980s there were “a few (quarterly) periods where prices actually went down” before hitting a positive trajectory shortly thereafter.

However, during the Great Recession, prices fell for years before accelerating again. It was also a time when the national economy and Utah faced a struggling labor market, Wood noted.

“Now we still have a very strong labor market, and we expect the job growth rate to decline a bit in 2023, but I still think it’s going to be a strong market,” Wood said. “So unless we have a real severe recession, I think prices have some support given our economy.”

Wood also said that even if house prices fell 10%, they “wouldn’t trigger a wave of foreclosures,” unlike what happened in 2008, “which just drove prices down.” We don’t have that.

Therefore, Wood predicts “a few quarters” into 2023, with house prices likely to be “most vulnerable” in the first and second quarters of the year.

“But by the end of the year, we’ll stabilize and we’ll be stable,” Wood said.

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Big Willow Creek Estates homes are under construction in Draper on Friday, November 11, 2022.

Laura Seitz, Deseret News

“The Great Debate”

While Eskic said he agrees with Wood on Utah’s strong job market, “but we’re operating in a different environment because of rates and prices.”

Eskic said it all comes down to affordability.

“We go back to the 70s, for example,” Eskic said. “If you divided the price of your home by your annual income, it was 2.6. Right now it’s close to 5. So from an affordability perspective, I think that will keep the market from accelerating to have more positive price appreciation.

Wood said “that’s a good point,” but added that the 1970s and early 1980s saw interest rates hit 18%. “Look at house prices, they were sticky. They did not fall. »

But housing costs weren’t as high back then, Eskic said.

“Yeah, that’s a valid point,” Wood replied, prompting laughter from the crowd. “But, we had a recession so, Dejan, we had a recession. I don’t think we’re going to have a recession now in Utah.

Eskic, smiling, said he and Wood should make a stage bet. “In a year…whoever is right must shave his beard.”

The two bearded men laughed, accompanied by laughter and applause from the audience.


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