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

Oct 3, 2022, 10:20 PM | Updated: 10:33 pm

LEHI, Utah — Housing market whiplash is setting in across the Beehive State as last year’s buying frenzy has given way to a slowdown and signs of a recession.

The most recent housing market index from the National Association of Home Builders (NAHB) and Wells Fargo revealed builder sentiment falling for the ninth month in a row and into recession territory.

“Buyer traffic is weak in many markets as more consumers remain on the sidelines due to high mortgage rates and home prices that are putting a new home purchase out of financial reach for many households,” said a statement from NAHB Chairman Jerry Konter about the September index.

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

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


“This recession isn’t anything like what we went through in the Great Recession,” said Jaren Davis, the executive director of the Salt Lake Home Builders Association.

Davis said the pandemic housing boom was bad for builders because of supply shortages, price spikes, lack of workers, and delays.

“What a recession is going to do is bring us back to a market that is healthier,” he said.

Davis said builders need to keep building housing to keep up with Utah’s growing population.

“We still have that demand side exceeding our supply side,” he said.

The most recent report from the Utah Association of Realtors showed home sales in August were down nearly 24% compared to a year before. At the same time, the number of homes on the market jumped by 80%.

“The pullback in demand has been particularly hard on homebuilders, causing new-home sales and construction to slow,” the report said.

While the year-over-year median homes sales price is still up 10% in Utah, the report said price growth is expected to moderate in the coming months.

The report blames inflation, higher interest rates, and recession fears for the slowdown in transactions.


“There’s no question that the housing sector is struggling right now—it’s contracting,” said Wells Fargo senior economist Mark Vitner in an interview with KSL.

For six weeks in a row, mortgage rates have climbed, according to FreddieMac. The 30-year, fixed-rate mortgage soared to an average of 6.7% as of last week’s Primary Mortgage Market Survey.

“One of the issues that builders are facing is that interest rates have risen so dramatically over such a short period of time that many people that had put a home under contract have suddenly found out that they can’t afford it,” Vitner said. “So, we’ve seen a surge in contract cancellations.”

Vitner said the jump in interest rates comes at the same time inflation is hitting home for families.

“More and more people have been priced out of the market,” he said.

The FreddieMac survey also captured a large spread in mortgage rates, making it more important for potential buyers to get quotes from different lenders.

“Our research indicates that borrowers could save an average of $1,500 over the life of a loan by getting one additional rate quote and an average of about $3,000 if they get five quotes,” said a prepared statement on Sept. 8 from Sam Khater, Freddie Mac’s Chief Economist.


Shopping around for the best loan benefited Utah County couple Peyton and Isaac Madsen.

“We had been living in an apartment for a while and were ready to get our own place,” said Peyton Madsen.

In late summer of 2021, they decided to make the jump into homeownership. At the time, the real estate scene was ultracompetitive, and they had to submit bids just to secure a building lot in Lehi.

“We loved it and loved the location, and so it felt right,” Isaac Madsen said.

Then, halfway through construction, they nervously watched as mortgage interest rates started to increase.

“That was overwhelming—seeing them rise,” Peyton Madsen said.

When they signed their contract, mortgage rates were under three percent. When it came time to close on their townhome, rates were double that.

“We were looking at nearly a six percent interest rate, which we thought was insane and was totally going to push us out of our comfort zone where we were thinking about not doing it and just pulling out,” Peyton Madsen said.

“I think there were moments where we felt completely powerless,” Isaac Madsen added.

The Madsens decided to shop around at more than a dozen lenders until they found the right loan for them. They also asked for and got some concessions from the builder.

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

In the end, they’re happy they didn’t give up on their dream

“Someday, we’ll start a family, and it’s been just great since being here,” Isaac Madsen said.

“We were able to make it work, and we’re super grateful that it all worked it out through all of this madness,” she added.


“It’s turning into a win-win market for both parties,” said St. George area realtor Blair Frei.

Frei said the market shift has changed the dynamic for potential buyers who recently had no bargaining power.

“Sellers were basically getting whatever they wanted,” Frei said. “We saw offers as crazy as people offering to deliver cookies monthly and mow people’s lawns. It was crazy.”

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

“We’ve had multiple builders reaching out to all of us realtors with some pretty cool incentives for buyers,” Frei said.

During one transaction, he helped a family get $12,000 of their closing costs paid.

“We were able to go in with no other competition on a home that they loved in an area they loved and make an offer and get the sellers to cover all of their closing costs,” Frei said.

Frei said there’s more wiggle room for price reductions and those home sellers are still in a good place with all of the equity they’ve accumulated over the last few years.

He said another tactic buyer can use is to use allowances or price reductions to buy down their mortgage interest rate.

KSL 5 TV Live

Top Stories

Unaffordable Utah

County leaders broke ground Friday to transform two public housing buildings into modern affordable...
Jed Boal, KSL TV

Work begins on 300 affordable housing units for Salt Lake seniors

Salt Lake County made a big move Friday to preserve and improve nearly 300 affordable housing units for seniors.
9 months ago
Ladd Egan, KSL TV

Home valuations jump dramatically, but watchdog group says to expect modest increase in property taxes

Assessors across Utah are finishing up home valuations for upcoming property tax notices, and two counties are already reporting big increases in values.
9 months ago
Utah's hot housing market...
Ladd Egan, KSL TV

Utah housing expert predicts pullback in activity because of mortgage rates

An expert in Utah’s housing market expects that rising mortgage rates will cause a pullback in real estate activity and a slowdown in home price increases.
9 months ago
Lauren Steinbrecher, KSL TV

SLC neighborhood townhall raises questions over Affordable Housing Incentives proposal

Thursday night, concerns arose at a community townhall in a Salt Lake City neighborhood over an affordable housing incentives proposal, that some worry is deeply flawed.
9 months ago
Ladd Egan, KSL TV

Unaffordable Utah: Budget-friendly family summer fun

After two summers of pandemic restrictions, Utah families are itching to have some fun. If inflation, gas prices, and sky-high plane tickets are taxing your budget, don't worry! KSL has the solutions.
10 months ago
Ladd Egan, KSL TV

National home builder confidence drops to two-year low

For the fifth straight month, national home builder confidence fell, according to the National Association of Home Builders/Wells Fargo Housing Market Index.
10 months ago

Sponsored Articles

Hand turning a thermostat knob to increase savings by decreasing energy consumption. Composite imag...
Lighting Design

5 Lighting Tips to Save Energy and Money in Your Home

Advances in lighting technology make it easier to use smart features to cut costs. Read for tips to save energy by using different lighting strategies in your home.
Portrait of smiling practitioner with multi-ethnic senior people...
Summit Vista

How retirement communities help with healthy aging

There are many benefits that retirement communities contribute to healthy aging. Learn more about how it can enhance your life, or the life of your loved ones.
Happy diverse college or university students are having fun on their graduation day...
BYU MBA at the Marriott School of Business

How to choose what MBA program is right for you: Ask these questions before you apply!

Wondering what MBA program is right for you? Take this quiz before you apply to see if it will help you meet your goals.
Cloud storage technology with 3d rendering drawer with files in cloud...
PC Laptops

How backing up your computer can help you relieve stress

Don't wait for something bad to happen before backing up your computer. Learn how to protect your data before disaster strikes.
young woman with stickers on laptop computer...
Les Olson

7 ways print marketing materials can boost your business

Custom print marketing materials are a great way to leave an impression on clients or customers. Read for a few ideas to spread the word about your product or company.
young woman throwing clothes to organize a walk in closet...
Lighting Design

How to organize your walk-in closet | 7 easy tips to streamline your storage today

Read our tips to learn how to organize your walk-in closet for more storage space. These seven easy tips can help you get the most out of your space.
Unaffordable Utah: Mortgage rates climb again as buyers look for price reductions