Last Annual Report-Metro Home Prices-Greater Salt Lake City Region

NATIONAL ASSOCIATION OF REALTORS®
Price Analysis for the Salt Lake City Metro Region
Home prices in the Greater Salt Lake City Metro Region are still booming. The market was a late-comer the
boom, but annual appreciation rates of around 20% have been quite exceptional. Job gains are continuing at a
robust pace. Home price appreciation, therefore, will likely to continue to be in the positive territory, though,
not likely at the recent double-digit pace. One consequence of fast-rising home prices will be fewer home sales.
New-home construction will need to trend downward as a result.
October 2007
Despite some media reports of the worst housing market conditions since the early 1990s, or even since the
Great Depression, home prices are not declining at the local level. All real estate is local. Also, unlike past
local housing downturns, which were accompanied with severe job cuts, the local and national economy
continues to add jobs. Mortgage rates have also been falling recently and stood near a historic low of 6.5% for
prime borrowers. Rates could be even more favorable in upcoming months as the Federal Reserve cuts the fed
funds rate in late 2007 and in 2008 as there are clear signs of contained inflation. A revival in FHA loans,
which had lost substantial market share to the risky subprime market, will provide funding for low-to-moderate
income households at much more attractive mortgage rates. If a modernization of FHA loans is implemented
including lower initial payment requirements, higher loan limits, and risk-based pricing then there could be a
surge in FHA loan usage.
The outlook is positive. Homebuilders having drastically cut production will help minimize prolonged
oversupply conditions. Further production cuts by builders, which is encouraged. On the demand side, job
gains have added to the number of potential homebuyers. Historical relationships imply roughly one additional
homeowner for every two additional new jobs. Since the peak of the housing market two years ago, the local
market added 55,000 net new jobs (August 2007 vs August 2005). After tapering off in prices, home sales
could again begin to strenghten.