Inflation and Utah Housing Market

The January housing market data is in! Plus we received the latest Consumer Price Index (CPI) report this morning, which is an indicator of inflation. If you’re wondering what type of market we’re experiencing in Utah, and how this latest CPI release affects the housing market, keep reading.

Table of Contents

• The January housing market data is in!

• Latest Inflation Report (Feb. 13, 2024)

• Bottom Line

The January housing market data is in!

Here’s a quick glance into what happened…

Many forecasted prices to decline in 2023 due to pressures from high interest rates. However, we see this was not the case for Utah, with prices 5.6% higher than a year ago.

Both new listings and closed sales are higher than last year which signals more homeowners feel comfortable selling their home, and more buyers feel comfortable buying a home knowing that prices aren’t declining, nor are they expected to in the near future.

This could also be due to mortgage rates being on a downtrend and lower inflation expectations, which could give homeowners looking to sell more confidence in purchasing their next home at lower interest rates.

If you’re looking to sell a home, we see some favorable conditions as more buyers enter the market too. Even with more homes for sale and more competition, the average amount of days it takes to get your home sold is trending down, with a 3.1% decrease from a year ago. Additionally, the current months of supply suggests more people are looking to buy a home than sell, which gives the seller a leg up with the possibility of receiving multiple offers.

Latest Inflation Report (Feb. 13, 2024)

The Federal Reserve tracks CPI along with other measures of inflation to guide the monetary policies put in place to either raise or lower interest rates, being one of the tools used to fight inflation. As the Federal Reserve chooses to raise interest rates, or keep them high for longer, this also keeps mortgage rates higher, making monthly payments higher for buyers.

The CPI report from this morning came in higher than expected. This led the 10-year treasury yield to spike, which pushed mortgage rates higher.

While some are worried this could be a sign of stickier inflation, Nick Timiraos pointed out that Goldman Sachs expected January’s numbers to come in slightly higher than expected due to beginning of year service based price increases. This is exactly what happened according to the detailed report.

Still, today’s report signaled that the Federal Reserve will likely NOT lower interest rates in March, as many previously expected. Instead, the market is now expecting interest rate cuts closer to May, June, or July. The Federal Reserve will continue watching inflation closely over the coming months to ensure the downtrend of inflation we’ve seen recently continues before lowering rates. As of right now, inflation expectations are still low.

Bottom Line

While mortgage rates are important, they don’t provide the full picture of local housing markets. The Utah housing market is proving to be resilient, even with higher interest rates. Remember, interest rates are still lower than their peak in 2023, and the demand for housing continues to grow. With recent gains in home equity, it may be a good time to sell or buy a home depending on your situation.