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Federal Reserve interest hike could level Utah's 'unsustainable' housing market, expert says

Posted at 6:01 PM, May 06, 2022
and last updated 2022-05-07 00:21:59-04

SALT LAKE CITY — An interest rate hike announced this week by the Federal Reserve will directly impact the housing market, but could the hike actually cool the way-too-hot housing market in Utah?

Some local experts believe this will help the market level out.

“Credit card debt, auto loans, business loans and mortgage rates are all going to be impacted by increasing interest rates,” said Robert Spendlove, a senior economist with Zions Bank.

The Fed is trying to slow down that housing inflation with the interest rate hike.

Utah could really use that slowdown — something that should have happened sooner, according to Spendlove.

“The problem that we’ve had with the housing market is the prices have been going up much too quickly," he said. "In Utah, the average home price is now over $550,000, and it’s gone up 30 percent in the last year. That’s just unsustainable."

Sarah Braegger with Real Brokers, LLC said she thinks the people who will feel this the most are first-time home buyers.

"I think the biggest impact will be with first-time home buyers, but they still have lots of options. Just because the rates have increased, doesn’t mean that they’ve skyrocketed. We're still at a very normal and regulated interest rate," she said.

Braegger also tells her sellers who are also anxious about buying that it’s all in the team you find to help you.

“If you can find a strategic lender and an agent that can help you understand the value of your equity and what it can do for you as a purchaser, there are so many great solutions,” she said.

Higher rates are meant to solve the problem in today's market — far more demand than supply.

“It is going to help rebalance the market,” said Braegger.

“What we really need to take into consideration is this is a healthy market — it’s getting us towards leveling out,” said Emilie Jensen with Intercap Lending.

Jensen said the interest rates have increased about 2.5 percent since December.

“It seems like it’s high, but only comparative to the last two years. What I like to point out is it’s not just about the interest rate when you are buying a home; it is 'What is your monthly payment? What is your household income? What does your overall picture look like to help you get in this home?'" Jensen said. "Values are higher than they’ve ever been before, so even though the interest rates are higher, you’re also getting so much more for your house right now."

She said on average, they’re seeing people stay in a home for three to five years — sometimes even less.

“That’s why we don’t focus on the interest rates because what is a 30-year fixed rate? That’s only good if you are going to be there for 30 years,” said Jensen.

Spendlove said we can expect to see a few rate increases over the next year to control inflation.