Real estate still looks rosy in Utah, local experts say
Symposium speakers point out some clouds
"The housing market here locally has been strong and still is strong," said John Norman, executive director of the Utah Mortgage Lenders Association. "We have the underlying economic foundation for it to be."
Record low unemployment rates and continued job growth, at a rate of about 4,500 new jobs each month, contribute to a continued need for housing along the Wasatch Front. However, a decrease in sales of existing homes and new building permits show signs that the market is beginning to slow down.
Presenters at a Wednesday morning symposium on the state of Utah's real estate market also painted a fairly rosy picture of the state's commercial, industrial, retail and residential markets. Of course, there are, as one presenter said, some "storm clouds on the horizon."
"In life there's not always all good news," said Gary Wright, a consultant for Ivory Homes, one of Utah's largest homebuilders. "There's good news and there's bad news. And so it is in Utah's residential housing market."
The biggest threat to Utah's market, analysts agree, is affordability. Despite Utah's strong performing economy, house prices in the state are increasing at least twice as fast as incomes and have, so far, shown no signs of dropping amid decreased sales.
The average price of a house in Salt Lake County is nearing $300,000 — a $110,000 increase over the past four years, according to a recent Wells Fargo analysis. At the same time, Wright said, land prices have gone up 250 percent.
"We have so many economic and demographic things that are strong in our economy," Wright said. In spite of these ... there is a serious disequilibrium in Utah. These prices will be a major drag on the number of new home starts and existing inventory sales."
Kelly Matthews, executive vice president and economist at Wells Fargo in Salt Lake City, agreed. "At the moment, we just simply can't afford the homes that are being offered for sale vs. the income levels of our people."
In his recent affordability analysis, Matthews predicted it would take a 7 percent reduction in house prices over the next year to start to solve the problem.
"That would be a very significant adjustment, but based on my analysis it would take something like that, along with another good year of income growth and really no change in interest rates, to begin to rectify the affordability situation that we've got ourselves into," he said.
Another blemish on the national housing picture, which has plenty of implications in Utah, is the meltdown in the subprime mortgage market. In the wake of that crisis, lenders have tightened standards, making it more difficult for even those potential homebuyers with good credit to qualify for a home loan.
The subprime market meltdown is "having a large effect on the housing market both nationally and in Utah," Wright said.
E-mail: awelling@desnews.com
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