Rising rates push Utah homeownership further out of reach

SALT LAKE CITY — The Federal Reserve's latest interest rate hike is creating new challenges for Utah families already struggling with housing affordability.

The announcement rattled financial markets this week, but economists said the bigger concern for many Utahns is what higher borrowing costs mean for their ability to purchase a home. Combined with elevated home prices and ongoing economic uncertainty, rising rates are making homeownership increasingly unattainable for renters across the state.

According to Dejan Eskic, an economist with the Kem C. Gardner Policy Institute, the share of Utah renters who can no longer afford to buy a home has climbed dramatically over the past decade.

"Today, 90% are priced out. A decade ago it was 60%," Eskic said.

The affordability gap between renting and owning has also widened considerably. About 10 years ago, the monthly cost of renting and buying a home was nearly identical. Today, prospective homebuyers face a much steeper financial hurdle.

"What's the premium to buy versus rent? It's about $1,300," Eskic said.

Home prices continue to compound the problem. While sales activity has slowed in response to higher interest rates, values remain elevated across Utah.

"Today we're about $520,000 for the average house across the state," Eskic said.

The impact of higher interest rates extends beyond monthly mortgage payments. Buyers must also earn significantly more income to qualify for a loan.

"That adds roughly $400 per month in your monthly payment," Eskic explained.

He said that increase translates directly into tougher lending requirements.

"Which translates into an income requirement to qualify at about $15,000 more," he said.

Economic uncertainty abroad is also influencing the outlook for interest rates and housing. Eskic pointed to geopolitical tensions, including conflict involving Iran, as one factor contributing to volatility in financial markets and concerns about inflation.

"What I worry about is when is that going to come. Is that a few months, a few weeks or a few years?" Eskic said, referring to the uncertainty surrounding when borrowing costs may begin to ease.

For now, economists said Utah's housing market remains defined by a combination of high prices and elevated mortgage rates, leaving many renters on the sidelines and forcing prospective buyers to wait longer for affordability conditions to improve.

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