Homeowners Don’t Want to Sell, So the Market for Brand-New Homes Is Booming

By Nicole Friedman The Wall Street Journal

LEHI, Utah — After mortgage rates shot up last year, Ivory Homes, one of Utah’s largest builders, suddenly had few buyers for the hundreds of homes it had under construction. So Clark Ivory, the chief executive, laid off 9% of his staff, and by January he had slashed construction by nearly 80% from its 2022 peak.

Then, much to his surprise, sales of new homes started picking up. By May, even though mortgage rates weren’t really budging, sales for all home builders were at their highest level since early 2022.

Millions of American homeowners have been reluctant to sell because they can’t afford to give up the low mortgage rates they have now. Only 1.08 million existing homes were for sale or under contract at the end of May, the lowest level for that month in National Association of Realtors data going back to 1999. For many would-be buyers—in Utah and in many other markets—new construction has become the only game in town. Newly built homes accounted for nearly one-third of single-family homes for sale nationwide in May, compared with a historical norm of 10% to 20%. Existing-home sales in May fell 20% year-over-year, while new single-family home sales that month rose 20% on an annual basis.

That divergence is yet another example of how this housing market is behaving like no other. “It’s such a rare thing,” said Rick Palacios Jr., director of research at Irvine, Calif.-based John Burns Research & Consulting, who predicts the disparity will widen in coming months.

So far, the home-building revival, coupled with financial incentives offered by builders, is providing only minor relief to prospective buyers. Builders aren’t erecting enough homes to offset the shortage of existing ones on the market, meaning buyers in many places still face bidding wars. On a national basis, home prices have only declined a small amount from their record highs in spring 2022. Interest rates have risen in recent weeks to their highest level this year.

For builders like Ivory, though, it has been a lifeline. Builder confidence, which declined every month in 2022, has risen for seven straight months to its highest level since June 2022, according to the National Association of Home Builders.

Investors believe the home-building industry—one of the most sensitive to changes in interest rates—has already gone through its recession and is coming out the other side.

Publicly traded home builders have reported strongerthan-expected results this year. The S&P Homebuilders Select Industry stock index is up 39.8% this year, outpacing the S&P 500’s 18.6% gain. Share prices for D.R. Horton, Lennar and PulteGroup, the three largest home builders, have performed even better.

The pandemic stoked an especially broad housing boom in 2020 and 2021. Many buyers sought larger spaces to spend more time at home, while others wanted to move closer to family. Ultralow interest rates made it inexpensive to finance their purchases. Home-building activity surged. Mountain West states such as Utah became an attractive destination during the pandemic for people leaving expensive West Coast cities in search of a lower cost of living and an outdoors lifestyle.

Home prices in the Salt Lake City area soared 53% between January 2020 and May 2022, on a seasonally adjusted basis, according to Freddie Mac’s home-price index.

Family-owned Ivory Homes, which was founded by Ivory’s father, Ellis Ivory, has been one of Utah’s top home builders for decades. Clark Ivory, 58 years old, became CEO in 2000.

In 2006, around the peak of the last boom, Ivory got worried about speculative investing. Ivory Homes started buying less land and paying off debt. To avoid selling to flippers, the company required buyers to sign an agreement that they were purchasing their homes as primary or secondary residences and that they wouldn’t sell for at least a year.

U.S. home prices fell 27% between mid-2006 and early 2012, sending ripples throughout the global economy and world financial markets. Ivory Homes stayed profitable between 2008 and 2012, Ivory said.

The pandemic-driven housing boom, Ivory said, didn’t involve as much speculation. Lending standards have improved, and investors have been buying homes to rent out to tenants, not to flip. During the pandemic boom, builders also faced obstacles they didn’t last time around, which kept them from overbuilding: supply-chain issues and labor shortages added weeks or months to their construction timelines. Ivory said his biggest concern, however, is affordability.

In the spring of 2022, rapidly rising mortgage rates abruptly slowed buying. Prices in Utah and around the U.S. had risen so rapidly that many buyers were priced out.

“It was the third weekend in May last year, and literally the lights just turned off,” said Ryan Smith, president of home building for Denver-based Oakwood Homes, a unit of Berkshire Hathaway that builds in Colorado, Utah and Arizona. “From there, the fight was on” to keep buyers from canceling.

Ivory Homes had 1,089 homes under construction in last year’s first quarter, including 513 that hadn’t yet been sold. “If I made one big mistake in the way I managed through Covid, it was trying to keep up” with demand, Ivory said. “I should have said to myself, ‘We can’t handle this.’”

In the second half of 2022, builders cut prices to attract buyers for their unsold homes or to persuade buyers already under contract not to back out. Demand rebounded this year in the first quarter. By April, builders forecast a 7% increase in sales for 2023, according to a survey by John Burns Research & Consulting, reversing their forecast of a 9% drop when surveyed in November.

In Daybreak, a master-planned community about a 30-minute drive from Salt Lake City, developer Larry H. Miller Real Estate initially expected to sell 100 to 125 lots this year to home builders, including Ivory Homes. Now it expects to sell 160, according to Brad Holmes, the developer’s president.

“There was no inventory on the existing market, so everybody was being pushed to a new home,” he said.

Ivory Homes has adjusted its building plans to meet current buyers’ tastes and budgets. It is building in a master-planned community called Holbrook Farms in Lehi, a fast-growing city about 30 miles south of Salt Lake City. Lehi and nearby communities are home to the area’s many tech businesses—a major market for Ivory Homes and other builders.

Last fall, Ivory Homes was building three-story homes with three or four bedrooms in Holbrook Farms to sell for up to $625,000. Called E-Villas, they had open kitchens and were targeted at first-time buyers.

As demand slowed late last year, Ivory said, the company decided: “We have to hit a lower price point.” It redesigned the E-Villas to offer a two-story version with three bedrooms, priced below $450,000.

Now the two-story homes are now selling better than the three-story ones, he said.

Builders nationwide are focusing on cutting costs and building smaller homes with lower price tags. Nationally, the proportion of new homes sold in May for under $300,000 rose to 17%, the highest level since December 2021.

Home builders also began offering sweeter terms to buyers. About 52% of builders provided incentives in July, up from 43% in July 2022, according to a NAHB survey. Many builders are paying to lower buyers’ mortgage rates, often by a percentage point or more, to help make the monthly payments more affordable.

Some buydowns reduce rates for only the first few years of a loan, but many builders, including Ivory Homes, are offering to lower the mortgage rate for the life of the loan. The temporary buydowns require buyers to qualify for the highest mortgage rate the loan will reach.

The arrangements benefit buyers and sellers alike. Builders would rather pay for lower mortgage rates than cut prices, because price cuts can affect the value of other homes in the neighborhood. For buyers, a lower mortgage rate can reduce a monthly payment more than a price cut.

Salt Lake City housing prices aren’t rising at the frenetic pace of 2021 and early 2022. In June, average new-home prices in the metro area fell 11% from the year-earlier period, factoring in the value of incentives, according to a John Burns Research & Consulting survey.

First-time home buyers that tour Holbrook Farms are factoring in a mortgage rate of nearly 7%, according to

John Savage, an Ivory Homes sales consultant. With a rate buydown from the builder, their purchasing power can go up by $100,000, he said.

Katherine Luke and Muhammad Salman had been looking to buy their first home in the Salt Lake City area for more than two years. They didn’t find many existing homes on the market within their budget that didn’t need renovations. Earlier this year, they started looking at new homes instead.

“For the price point, it does seem like it makes more sense than trying to renovate an older home,” Luke said. There is more to choose from in the new-home market, she said.

The couple bought a new four-bedroom house from Ivory Homes in early July for about $600,000. They opted for a temporary buydown that reduces their mortgage rate for the first two years of the loan, and they hope to refinance to a lower rate as soon as they can.

“I’m hoping we made the right decision,” Luke said. “I don’t know if it was the right time to buy, but rents keep going up.”

Buyers remain sensitive to small changes in mortgage rates, and an increase in the average to above 7% could slow demand, builders say. The average rate for a 30year fixed mortgage was 6.96% in the week ended July 13, the highest since November, according to Freddie Mac. A recession, higher unemployment or uncertainty about the presidential election also could spook buyers.

Some regional and local banks have been tightening credit for small businesses, which could also threaten some builders’ ability to borrow money for new projects. And while builders’ costs have come down somewhat, largely due to a big decline in lumber prices, they are still higher than prepandemic levels. Federal student-loan payments are set to resume in the fall, which could make it more difficult for first-time home buyers to save for down payments.

Yet others who delayed their home-buying plans in 2022 have grown comfortable with current mortgage rates, real-estate agents and builders say.

“People still need a house, because they got married last year, they graduated college last year, and they’re tired of waiting,” said Barry Gittleman, chief executive of Murray, Utah-based builder Hamlet Homes.

And after two years of robust home sales and high margins during the recent housing boom, builders can afford to keep offering rate buydowns to entice buyers.

“We’re all relieved now that we had a really good first half of the year,” Ivory said. “This is not a market to be scared about.”

Provo, Utah

By Sara Korlevich

The city of Provo, Utah, is the biggest boomtown in America, gaining the most new residents and experiencing the sharpest economic expansion in the nation, according to a new analysis by background check company Checkr. In fact, Utah claims four of the biggest boomtowns in the United States.

Checkr’s analysis defines a “boomtown” as a city that has experienced rapid economic growth and development in a short period of time. Using data from the Census Bureau and the Bureau of Economic Analysis, Checkr factored in metrics like growth in population, workforce, housing units, personal income and businesses to compile its list of America’s biggest boomtowns in 2023.

Besides Provo, cities in Utah that made the list include St. George (number five), Logan (number eight) and Ogden (number nine). “Utah has fostered a businessfriendly environment that has attracted companies from various industries, including technology, finance, health care and outdoor recreation,” researchers noted. “This has led to job opportunities and a steady influx of professionals and skilled workers seeking employment in these thriving sectors.”

Clearly, Utah has seen some fantastic growth over the past five years in both population and economic development.

Why? Utah has fostered a business-friendly environment that has attracted companies from various industries, including technology, finance, healthcare, and outdoor recreation. This has led to job opportunities and a steady influx of professionals and skilled workers seeking employment in these thriving sectors.

Alongside Utah, other cities in the top 10 are two highranking Idaho destinations—Boise City, 2nd overall, and Coeur d’Alene, 3rd overall. A combination of strong economic opportunities, top-ranking quality of life, and a lower cost of living has allowed these Idaho cities the opportunity to flourish in attracting new residents.

Rounding out the top 10 are Bend, Oregon, 4th overall; Destin, Florida, 6th overall; tech-favorite Austin, Texas, 7th overall; and Reno, Nevada, 10th overall.

Checkr analyzed data from all 381 US metro areas to uncover the fastest-growing cities in America.

In recent years, the country has experienced a significant degree of economic uncertainty, with farreaching implications for businesses, consumers, and the cities they call home.

Factors such as housing instability, workforce layoffs, and a potential recession contributed to a climate of unpredictability, challenging the stability and confidence in the nation’s economy and the growth of cities across the country.

Additionally, the outbreak of the COVID-19 pandemic brought about unprecedented disruptions, leading to widespread job losses, business closures, and financial volatility.

Through all these hardships, certain U.S. cities have grown exponentially, while others have struggled to develop and attract new residents and jobs. Some cities have grown so fast that they’ve been labeled “boomtowns.”

A boomtown refers to a city that experiences rapid economic growth and development within a relatively short period. These cities and towns often undergo a significant population increase and witness a surge in economic activity due to various factors, which we’ll discuss shortly.

Boomtowns typically attract large numbers of people seeking employment and entrepreneurial prospects, leading to a rapid expansion of infrastructure, housing, and services to accommodate the growing population.

Checkr compiled this list to bring to light cities across the country that are best fit for businesses looking to start up or expand, and for individuals seeking a new home with great opportunities for employment. That said, if a business owner is looking to expand, relocate, or start a new venture, a boomtown might be a good place to learn more about. Additionally, if an individual is looking for a place for higher wages and better employment opportunities, perhaps a boomtown might be for them.

To showcase the boomtowns filled with opportunity, Checkr crunched the numbers using data sourced from the U.S. Census Bureau and the Bureau of Economic Analysis.

The report examined 10 critical factors of 381 US metro areas—the total number of metro areas as identified by the U.S. Census Bureau. Each of the following 10 key factors was weighted appropriately and scaled. Researchers then calculated the weighted sum of the factors to obtain a final Boomtown Score—the lower the score the better—using the metrics below.

Kay factors: Population growth, GDP growth, unemployment rate, workforce growth,poverty rate, housing unit growth, real personal income growth, change in median age, change in the total number of businesses, percentage of high-earning residents (making more than $100,000)

We’ve learned why certain cities in the US are booming and experiencing economic and population growth. But why are some cities flourishing while others are struggling to grow?

Several factors should be considered here: Economic investment, demographic trends, environmental constraints, social and political instability, market conditions, and climate, among others.

It’s equally important to recognize that each city’s growth potential is influenced by a unique combination of factors, and addressing the challenges requires a comprehensive approach that involves collaboration between government, private sector entities, and the community to identify and overcome barriers to growth.

Decatur, Illinois was the slowest-growing city in the country. Additional research shows that Decatur lacks high-quality manufacturing jobs, and there is a “trickledown effect.” David Wilson, a professor of Geography and Urban Planning at the University of Illinois believes “the jobs replacing the manufacturing jobs are service industry jobs and, in many ways, do not provide a living wage.” The research indicates that economic factors and job opportunities are contributing to the city’s position as the lowest-ranked city on the list.

Joining Decatur in the bottom five are Shreveport, Louisiana; Lima, Ohio; Lawton, Oklahoma; and Bloomsburg, Pennsylvania.

For Shreveport, specifically, one major limiting factor was COVID-19 and the impact that the pandemic had on gaming and casinos. Reporting immediately following the start of the pandemic, the Shreveport Times said that “the unthinkable happened during the stay-at-home order — casinos went dark. No gaming. No buffets. No concerts. Six area casinos were closed. DiamondJacks never reopened.”

Rounding out the bottom 10 on the list of slowergrowing cities are Pine Bluff, Arkansas; Champaign, Illinois; Erie, Pennsylvania; Beaumont, Texas; and St. Joseph, Missouri.

These low-ranking cities are all struggling for different reasons, but economic hardship is a common theme. From population loss in Erie and Beaumont to the labor force issues in Decatur, each city is struggling currently but ultimately hopes to regain its footing and prosper in the coming years.

Sara Korolevich serves as checkr.com’s editor and content manager.

Stop Believin’! 4 Housing Market Myths Hurting Today’s Buyers and Sellers

Misconceptions are popping up about the state of the real estate market on social channels and forums.

By Sally Jones Realtor.com

The housing market has been decidedly stuck of late. Sellers with low mortgage rates are holding on to their homes, leaving buyers with scant listings to choose from. And buyers who do find a house face substantial economic challenges as median home prices and mortgage rates remain high.

With sellers and buyers at an impasse, misconceptions and outright myths are popping up on both sides about the state of the market on social channels and forums.

However, some of the supposed housing issues that are coming up time and again aren’t true. Here are the four biggest myths about the current housing market and why experts say they’re wrong.

1. The housing market is about to crash, just like in 2008

Today’s buy-sell stalemate has some would-be buyers almost hoping that we are in a bubble—that it will burst and lead to plentiful homes available at fire-sale prices.

No one can blame a buyer dealing with the double whammy of higher home prices and interest rates for hoping for a lucky break. But the reality is that the 2008 housing market collapse tripped a recession that caused record job losses. And job loss doesn’t further anyone’s financial dreams.

Even if we are in a bubble right now—and most experts say it’s hard to call it until it’s in the rearview mirror— conditions are not at all like they were in 2008.

Unlike today, there was a glut of new homes being built then, sellers were trying to attract buyers, and homebuyers could qualify for a mortgage with little to no money down.

“That access to credit included a surge in lenders offering loans to buyers with lower credit scores, or subprime borrowers,” said Chris Ragland, principal at Ragland Capital

Easy credit might sound good in theory, but some loans were adjustable-rate mortgages with a low “introductory teaser ” rate. And once the introductory rate ended and the loan adjusted to a higher rate, some buyers could no longer afford their monthly payments.

“Subprime borrowers in particular who suffered a job loss had little to no accumulated equity in their homes,” said Ragland. So when the economic downturn came, they were immediately underwater on their loans and many defaulted.

None of these conditions is true today. Today almost half of all homeowners have more than 50% equity

“Laws were passed in 2010 to strengthen verification of a borrower’s ability to repay a loan,” said Ragland. And the drivers of today’s home prices are entirely different.

“The 2020 to 2022 price increase was driven by an inventory shortage and unusually low interest rates,” said Bruce Ailion, attorney and Realtor® in Atlanta.

2. Owners have such good rates, they will never sell One of the biggest complaints about today’s housing market is that there just aren’t enough homes for sale. And given the unbeatable interest rates available two years ago, when many bought or refinanced, what would make sellers budge?

“Mortgage rates were forced lower than they should have been, lower than they likely ever will be again,” said Ailion. So when you look at it from the seller’s point of view, it doesn’t make sense to give up a low longterm rate.

But, there are always life events that force homeowners to sell.

People get new jobs and must relocate. Growing families need more room or want to be in a particular school district. Retirees downsize or move to a better climate. Seniors move to be closer to family or go into assisted living. And their home will go up for sale.

3. As rates rise, home prices will drop

Many would-be homebuyers have hoped that higher interest rates would bring home prices down. But the relationship between interest rates and home prices is complex.

“Interestingly, the increase in interest rates has not resulted in a decline in prices in most markets,” said Ailion.

In fact, home prices have been all over the place this year and vary from city to city. Home prices are still being driven by inventory. And in the most popular locations, an updated home that’s move-in ready might still get multiple offers.

“Some buyers are dating the rate and marrying the house,” Ailion explained. “Today’s high interest rates can be refinanced in the future. And today’s housing prices will likely be higher when those lower interest rates return.”

4. Good-credit buyers are subsidizing buyers with bad credit

This myth blew up over a misunderstanding about government-backed Fannie Mae and Freddie Mac loans and a new fee structure

Fannie and Freddie are government-sponsored enterprises (GSEs) on a mission to make mortgages more accessible to first-time homebuyers with lower incomes but good credit. They don’t issue loans directly but work with lenders to lower their risk by guaranteeing certain loans should the borrower default. The organizations also purchase other lenders’ loans on the secondary market and sell them to investors as mortgage-backed securities. This frees up lenders to be able to keep lending to new borrowers.

Fannie and Freddie are essential organizations in the mortgage industry. About 70% of all mortgages are GSE-backed. So they can set requirements and establish fees.

The new fee structure eliminated upfront fees for first-time homebuyers. At the same time, it increased fees for other loans that are outside the organizations’ stated mission and borrowers who don’t need a leg up: namely, second-home loans, high-balance loans, and cash-out refinances.

It really had nothing to do with a borrower’s credit score.

“It’s a myth,” said Ailion. “Buyers with poor credit always pay a higher interest rate than buyers with good credit.”

Sally Jones writes about home buying, decorating, and renovating.