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Imagine earning over $100,000 a year and being qualified to buy a half-million-dollar home — but still not being able to swing it.

In 2022, that was Joseph Branca’s reality, along with plenty of other Utahns who wanted to join the mad dash to homeownership, but ultimately ended up walking away.

“I just felt totally iced out,” Branca said.

That’s the story of 2022. How the pandemic housing frenzy — which drove housing prices up to unimaginable levels in 2021 and into early 2022, especially in Western states like Idaho and Utah — came to a grinding halt mid year, and the market crashed down to reality.

It was a year in which a boiling hot housing market saw “historic deterioration,” as Fortune put it. The market was suddenly plunged into ice cold water when the Federal Reserve’s war with record levels of inflation sent mortgage rates skyward, and the mask that helped drive home prices so high suddenly lifted. That’s when buyers found their affordability ceiling.

The music stopped. The lights shut off. The party was over.

“The cops came,” quipped Dejan Eskic, senior research fellow at the University of Utah’s Kem C. Gardner Policy Institute, one of Utah’s leading housing experts. “The cops came and busted everyone.”

The year of the Fed

Utah’s housing experts continue to shy away from the word “crash,” since what happened in 2022 is still nothing like what happened after the 2006 housing bubble popped. But high mortgage rates, some weeks hovering over 7%, did trigger a type of collapse — in demand and sales. Prices, though they’re on a downward trajectory, are still up year over year by single-digit percentages — at least for now.

“I like the word contraction better than collapse,” said Jim Wood, director of research and science and the Ivory-Boyer senior fellow at the Kem C. Gardner Institute. The best way to describe it, he said, is an “abrupt contraction” that’s had a dramatic effect on all aspects of the market, but especially on homebuilding, which he and Eskic worry will exacerbate Utah’s housing shortage long term.

To Eskic, 2022 was the “year of the Fed.” In his mind, it was a “federal miscalculation” to raise borrowing rates so high and so fast after two runaway years. In early 2022, “momentum was slowing” from 2021, but then “the faucet just got turned off.”

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“2021 was on fire, and in 2022 it’s an empty concert hall,” he said. If rates had risen to around 4.5%, “the train would still go. It would slow, but it wouldn’t be stopped like it is now.”

Wood interjected, saying he’s “got to defend the Fed. If they hadn’t been so aggressive in 2020 and 2021, we’d be talking about unemployment now rather than inflation.” He also noted it was really Congress that juiced the economy with so much one-time stimulus money, not the Fed.

The year of the reset

While 2021 was the year of the “shocking” home price, 2022 was “the year of the reset,” said Steve Perry, president of the Salt Lake Board of Realtors.

Sellers could no longer “do whatever they wanted,” Perry said, and suddenly buyers had more options — at least those who could still afford to buy.

After prices peaked in May, Salt Lake County’s median single family home price hit $650,000. As of November, that figure was down to $569,000 — 14% lower than the May peak but still 4% higher than in November of 2021.

“That’s a good thing, because they were overpriced anyway, right?” Perry said. “They climbed up so high so fast. (Now) it’s resetting, it’s balancing, it’s coming down.”
 
 

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