Economist: Homes may drop more

Already down 8%, S.L. County prices could fall another 9%

The downturn in Salt Lake County's residential real estate market will bottom out by the end of the year, with home prices having fallen a total of 17 percent, according to a top local economist. In comments echoed by others who track the market, Kelly Matthews said Wednesday that average selling prices already have fallen about 8 percent, to $286,250, from the third quarter to fourth quarter of last year. The Wells Fargo & Co. executive vice president expects the average to fall another 9 percent by the end of this year, to $260,000. "A 17 percent drop over 15 months is pretty aggressive," Matthews said, especially given Utah's relatively strong economy. The outlook beyond that is anybody's guess, he said, adding that home prices in the Salt Lake area probably are going to remain flat at least through 2009. A similar scenario is forecast for surrounding counties along the Wasatch Front. The upside, Matthews said, is that a steep home-price drop will help address the area's affordability issues. The state's run-up in prices in recent years has made homes less affordable because wage increases generally have not kept pace. Tighter lending standards put in place after the nation's subprime lending crisis also have made it more difficult for many families to qualify for a home loan.
With fewer people qualifying and fewer able to afford a house, sales and new-home construction along the Wasatch Front have declined substantially since last summer. Jillinda Bowers, president of the Salt Lake Board of Realtors, said she agrees with Matthews' forecast. "Yes, our market did need to stabilize, but I think it will be quickly taken care of." An economist with Moody's Economy.com who tracks Utah concurs, predicting improvement after the end of the year for a state market that he believes peaked in the fourth quarter 2007. Gus Faucher of the economic forecasting company predicts that statewide, the average home price will have fallen 11 percent, to $184,000, from the last quarter of 2007 to the end of this year. But he said that drop is still much less steep than western neighbors such as Arizona, where he estimates the decline will be 24 percent, and California, estimated at 21 percent. Matthews said he didn't analyze the residential markets in other metropolitan areas, but agrees that Utah's downturn not only will be shorter but less severe than in other states. "There's no doubt we didn't go up as high," he said. "The good news is that we don't have to go down as low."

By Lesley Mitchell The Salt Lake Tribune