Utah's housing market freezes as more homeowners hold on to low mortgage rates

SALT LAKE CITY (KUTV) — A new Market Watch report says that more people now have a 6% mortgage rate instead of a 3% rate nationwide, but that’s not the case here in Utah.

The Beehive State has more people holding on to their low rates in the 3% range, which came up during the pandemic. With more people holding on to their low mortgage rates, people are less willing to buy now and take on a higher one. This pattern is called the “lock-in effect”.

This effect causes a bit of a freeze in the market as fewer people are moving.

“I bought my townhome in 2019, and I had a good interest rate at the time, it was a little over three percent, and then when the pandemic hit, I had the opportunity to refinance and lower it to 2.6 percent, which is what my current rate is,” said Hilary Reiter Azzaretti. She is one of the majority of Utah residents who have a low rate on their home.

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Eye On Your Money. (Graphic: KUTV)

“The higher rates have absolutely prevented me from buying another home,” she added, noting that she is content with her living situation anyway.

Utah’s housing market is unique. Many people are moving into the state, and the supply is struggling to keep up. Now, people are doing what they can to keep their homes affordable.

“Because the gap was so wide, they decided to keep their home, and by deciding to keep their home, it means less homes on the market. Supply and demand, that means the homes went even further up in pricing,” said Paul Benson, the CEO of Engel and Volkers GG.

He said Utah is desirable for many reasons, like its easy access to the airport and top outdoor recreation. Utah is considered a safe state and is one of the lowest-taxed states in the country.

With the demand, loan officer Tina Logan said she sees people – especially first-time homebuyers – struggling to find ways to finance a home as most need to meet certain criteria to qualify.

“I’m finding it hard for people to meet that criteria,” Logan said. She added that she sees others hesitant to give up their 3% rate.

“It’s tough to give up that 2.5/3 percent,” said Logan. “I’m in the same boat.”

Tina and Benson both said there are ways to be creative in your financing strategy, and there are also opportunities to refinance. But refinancing may not look the same as it did during the pandemic.

“I don’t think we’ll ever see that 2.5 – 3 percent again,” Logan said.

Mortgage rates did, however, fall to the lowest level in more than three years just this week.

Benson added that the gap in rates is coming down, and he expects the market to balance out over time.

“It’s not going to happen overnight, unfortunately,” Benson said.

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