Short sales in the Salt Lake City-Murray metro area rose 12.2% in 2025, reaching 1.8% of all home transactions, according to a Realtor.com report published Thursday, July 16. The metro area includes Cottonwood Heights and Holladay.
The trend reflects growing financial stress among homeowners who bought near the 2022 price peak with little money down. A short sale happens when a lender lets a homeowner sell for less than the remaining mortgage balance, accepting the loss to avoid a longer foreclosure process.
"The surge of purchases in SLC in recent years and the more recent retreat of home prices there put some recent buyers in danger of being underwater," Realtor.com Senior Economist Joel Berner told the Deseret News on Friday, July 17.
Utah leads the nation in short-sale-to-foreclosure ratio at 3.3 to 1, according to report author Glen Morgenstern, a Realtor.com economist. Only Idaho comes close at 2.9. Most states fall below 1.
Local market shows similar cooling pattern
More recent local data suggests the slowdown has continued into mid-2026. Closed sales in Cottonwood Heights dropped to 17 in June, down 43% from 30 closings in June 2025, according to MLS data aggregated by Best Utah Real Estate. Active listings climbed to 84, the highest in six months, and five of those 17 closings required a price cut before selling.
The median sale price in Cottonwood Heights fell to $765,000 in June, a 3.9% decline from $796,250 in June 2025. The 30-year fixed mortgage rate sat at 6.875% in June, up from 6.19% in February, adding roughly $276 per month to the payment on a median-priced home financed with 20% down, according to Best Utah Real Estate.
Holladay's market has held up slightly better. The average home value there was $849,130 as of May 31, up 3.9% year over year, with homes going to pending in about 13 days, according to Zillow.
Why the shift is happening
Morgenstern pointed to the end of COVID-19 pandemic assistance programs as a driver of rising distressed sales across the board. He said homes in the Salt Lake City metro take about a third longer to sell than three years ago, and inventory is higher.
"As the market slows, the buyers who stretched the most, those who bought near the 2022 peak with little money down, have the least cushion to absorb selling costs, and some of them end up short," Morgenstern told the Deseret News.
Nationally, short sales rose about 16% year over year in the first quarter of 2026, according to Realtor.com. Still, the numbers remain far below crisis levels. Only 3.2% of mortgaged homes were underwater in the first quarter of 2026, compared with roughly 25% during the Great Recession, according to ATTOM data cited in the report.
What to watch
The Realtor.com report does not break out short sale figures at the city or ZIP code level, so the 1.8% metro figure cannot be pinpointed to Cottonwood Heights or Holladay specifically. But with local closed sales falling, inventory rising, and mortgage rates elevated, the conditions Morgenstern described apply here. The luxury segment in Cottonwood Heights already shows 6.14 months of supply for homes above $1 million, compared with 2.03 months for single-family homes overall, according to Salt Lake Realty Group's July 2026 market snapshot, suggesting higher-priced properties where buyers may have stretched furthest face the longest path to sale.
