SALT LAKE CITY — As the U.S. housing market is showing big signs of cooling — from mortgage lender layoffs to several consecutive months of dropping sales — it's hitting home in Utah in a big way.

The tables are starting to turn. Motivated sellers are beginning to temper their expectations that buyers will pay just about anything to lock in a home.

Almost half of all home sellers in Provo — Utah County's largest city located about 45 miles south of Salt Lake City — dropped their asking prices in May as mortgage rates climbed well above 5%. Higher borrowing rates, combined with the historically high home prices, have priced out over 70% of Utah households from affording the state's median-priced home.

That's according to data posted by Redfin this week, noting Utah's Provo regional market saw the highest share of listing price drops in May out of 108 metros included in its analysis.

It's important to note monthly listing price drops aren't the same as a price crash or an actual decrease in Utah's home price trajectory, which has been on the rise ever since the 2006 U.S. housing market popped and bottomed out in 2009. Experts have said it would likely take an economic sea change — sweeping layoffs, foreclosures and a dismal job market — to drastically disrupt Utah's housing price trajectory and send statewide prices spiraling downward.

And price listing cuts aren't unusual — in fact they're common for sellers, especially motivated sellers, to cut their listing price if they're finding their initial listing price might have been too high to be competitive with other listings.

However, if a regional market sees sweeping price cuts, "it usually means things are beginning to cool down," as Fortune put it. "That's exactly what we're seeing right now."

What's happening in Utah's housing market

About 47% of homes for sale in Provo saw prices slashed in May, according to Redfin. That's the highest share of cuts that regional markets across the nation saw in May. Compare that to a year ago, in May of 2021, when only 12% of Provo's listings were seeing price cuts.

And two other Utah regional markets — Salt Lake City and Ogden — were among the top five metro areas that saw the biggest increase in share of listings with price drops compared to a year earlier.

• In Salt Lake City, 45.8% of homes for sale saw price cuts in May. Ogden wasn't far behind, with 42.6% of homes with price drops. That same figure was only 20% in Salt Lake City and Ogden in May of 2021, according to Redfin.

Related:

The US housing market is heading toward the 'most significant contraction' since 2006

The U.S. housing market is in the early stages of what one national economist says is the biggest slowdown in over 15 years. But that doesn't mean housing prices are about to hit a death spiral.

Here's how these Utah markets compare to other top 10 regional markets that saw the biggest shares of price cuts in May, according to Redfin:

1. Provo — 47.8% of homes for sale saw prices drop in May.
2. Tacoma, Washington — 47.7%.
3. Denver — 46.9%.
4. Salt Lake City — 45.8%.
5. Sacramento, California — 44.3%.
6. Boise — 44.3%.
7. Ogden — 42.6%.
8. Portland, Oregon — 42%.
9. Indianapolis — 41.9%.
10. Philadelphia — 41.2%.

Why are sellers cutting prices?

The increase in price drops is a big indicator that the housing market is taking a turn — and buyers have found their limit.

"The uptick in price drops is symbolic of the slowdown in the housing market. Many buyers are backing off amid skyrocketing home prices, surging mortgage rates, high inflation and a faltering stock market," Redfin reported.

In other words, sellers are recalibrating their prices to better match buyers' appetites. Redfin chief economist Daryl Fairweather said as more sellers "come to terms with the slowing market" the share of homes with price cuts will also slow down.

"There are two kinds of sellers in today's market: Those who already know the market has cooled, and those who are learning about the cooling market as they go through the selling process," Fairweather said.

"The former wants to sell quickly before the market slows further and they're willing to price slightly below comparable homes in their neighborhood right away, and the latter may have to drop their price if their home doesn't attract buyers within a few weeks."

Related:

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Why are listing prices dropping in Utah, Idaho?

The pandemic had an outsized impact on the West's housing market, especially in mid-size states like Utah, where cost of living and housing has been considerably more affordable than places like California but also where outdoor recreation opportunities abound.

"The regional housing markets seeing the most price cuts are in the very places that soared the most during the pandemic," Fortune reported, pointing to Provo. "The market, just a short drive from several ski slopes, saw a huge influx of remote workers during the pandemic."

The rapidly growing state of Utah was already facing a housing shortage before the COVID-19 pandemic hit and put it and other states in the West, like Idaho, on the national map as appealing destinations for Americans set free by remote work. Demand skyrocketed even more, translating to yearly double-digit price increases that have compounded to over 50% or even 60% price increases in some areas.

In fact, three of Utah's regional housing markets and one of Idaho's — Provo, Salt Lake City, Ogden and Boise — were among the top 10 places where home prices increased the most during the pandemic, according to Redfin.

From May of 2020 to May of 2022, home prices went up by a staggering 65.7% in Provo to a median price of $550,000, Redfin reported. They rose 56.2%, to $556,000, in Salt Lake City, 57.2%, to $500,000, in Ogden, and 66.7%, to $550,000, in Boise.

"The soaring prices were largely due to out-of-town homebuyers moving in during the pandemic, competing with locals for a limited supply of homes," Redfin reported, noting migration into both Boise and Utah "nearly tripled throughout 2020."

But May's price drops — and an increase in more people looking to leave the Salt Lake area, according to Redfin's data — could be an indicator that the pandemic-fueled hype over Utah and Idaho may be running dry.

"The trend has started to reverse in both places, with Salt Lake City seeing a net outflow (more Redfin.com users looking to leave than move in) for the first time on record in the first quarter," Redfin reported.

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