Softening Housing Market Offers Little Reprieve to Many Utah Residents

Utah mortgage demand and home prices will soon fall, but not enough to make them affordable, according to presenters at the Washington County Economic Summit.

“I’m concerned, and I think you are, too,” said Vardell Curtis, CEO of the Washington County Board of Realtors, before a packed auditorium at the Dixie Center. “And if you’re not, you should be.”

According to the St. George Daily Spectrum, public employees cannot afford to buy homes in Washington County, where the average single-family unit now sells for almost $350,000. For service employees, Curtis said, “Paying rent is not any easier, unfortunately.”

A softening housing market will offer little reprieve.

Homes lingering on the market, with many more in development, have swelled inventories and should push prices down in early 2007, Curtis said, but not for long. Even with a few bumps in the road, the end of 2007 could look a lot like the beginning of 2006, “which was still a pretty good time in the real estate market.”

Curtis echoed the warnings of Robert Gray, of the Strategic Planning Group, who in a previous session cited the lack of affordable housing as throwing the local market into crisis. With workers unable to find housing, a labor dropoff could choke the booming economy in Southern Utah.

“Housing is critical to growth. Area home prices are greatly outpacing incomes. Guess what: That can’t continue,” Gray said.

The real estate boom edged many local buyers out of the market in the last several years, as average home prices were 3.6 times higher than family income in 2002. They were 7.3 times higher in 2006. Utah foreclosures are already rising.

Raising Washington County’s median income, $46,900, to the state median, $58,000, would eliminate 80 percent of the housing problem. Income-based solutions could also address down payments, mortgage rates and various transportation costs.

But in tackling home prices, governments could subsidize infrastructure and streamline the permits and requirements that raise development costs. Home Builders could focus on smaller units and higher density.

“Expecting housing to be affordable without changing the any of the factors that are actually affecting affordability - well, that’s insane,” said Gray.

Curtis told his audience to keep 2006 in perspective, despite the media’s “doom and gloom” about the severe dropoff in demand for housing and the mortgage loans needed to finance homes.

“At the end of the day, it was not a bad year,” he said.

Washington County continued to outpace the state in price appreciation, with St. George placing 9th among metropolitan areas nationwide.

“It’s still a good time for both buyers and sellers,” Curtis said.

Builders have taken notice, with permit applications slumping in 2006. But sellers should not expect the prices homes fetched in 2005, even though the opportunity to receive great rates on home loans is strong.

“To an economist, if you can’t sell it, the price is probably too high,” said economist Lecia Langston. “You’ve seen it, I’ve seen it, and the numbers are showing it. I’m here to tell you this probably isn’t over yet.”