Sales of Utah homes drop 33.8%
February 23rd, 2008, 7:15 am Hobbies Ideas
Sales of existing homes in Utah dropped 33.8 percent in the fourth quarter of 2007, compared to the fourth-quarter of 2006, mirroring decreases in much of the rest of the nation, according to a report released Thursday by the National Association of Realtors.
The median sale price of existing homes in the Salt Lake City area also showed a drop at the end of 2007. While sale prices for the year were up 2.5 percent overall, they decreased 7.13 percent from the third quarter to the fourth quarter of 2007.
The median sale price of a home in the Salt Lake area in the fourth quarter was $229,100, down from a median sale price of $246,700 in the third quarter.
Utah Association of Realtors president Dave Mansell said even though sales are down, there is still cautious demand in the marketplace in Utah.
“People are holding back because they’re afraid the market is going to fall on its face,” he said. “They’re hearing Florida, California and Las Vegas are seeing these huge drops in prices, and they think it’s coming here.”
But Utah will likely avoid major problems, he said, because the state’s economy is strong and the housing market has not been vulnerable in the ways other areas have been.
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“Historically, we haven’t had the same market swings,” he said. “We don’t go up as fast, and we don’t fall as fast or as far, so it’s much more stable.”
Sales of existing homes fell in 45 states during the October-December quarter, with metropolitan areas showing growing weakness, the national report said. The fourth-quarter data from the National Association of Realtors underscore the breadth of the housing market’s slump.
Prices have fallen more than 10 percent since their July 2006 peak, in the worst U.S. housing slump in 26 years, as the number of unsold homes has grown and prospective homeowners have had a tougher time getting home loans.
The inventory of unsold homes was 3.91 million in December, according to the Realtors group. The average number since 2000 is 2.67 million.
South Dakota was the lone state to show a sales increase. Existing home sales there rose 8.9 percent from the same quarter a year ago. Sales were unchanged in North Dakota. No sales figures were available for Idaho, Indiana and New Hampshire. Sales also fell in Washington, D.C.
Median home prices fell in more than half of the 150 metropolitan areas surveyed. Out of the 77 that experienced declines, 16 showed double-digit percentage drops, the trade group said. The largest price declines were found in Lansing, Mich.; Sacramento, Calif.; Jackson, Miss.; and Riverside, Calif. all of which posted price declines of 17 to 19 percent.
Wells Fargo economist Kelly Matthews said price is still the biggest issue in the Utah housing market, and the fourth quarter’s 7.13 percent drop in the median sale price of existing homes in the Salt Lake area shows the market is correcting itself.
“In relationship to income, in relationship to affordability, the prices are simply too high,” he said.
If mortgage rates continue to hover around 5.75 percent and home prices decline in the 5 percent to 7 percent range over the next few months, the local housing market should get its excess inventory sold and stabilize by midyear 2008, he said. He also noted homes sales typically decline during the cold-weather months and start to rebound in the warmer months.
Zions Bank economic consultant Jeff Thredgold said the decline in median prices is logical considering the current mortgage crunch and the glut of higher-priced homes on the local market. He said the Wasatch Front currently has a high volume of homes for sale priced at $500,000 and above.
If it’s easier to finance a $350,000 house than an $850,000 house, then the median price will come down,” he said.
The economic stimulus package recently approved by Congress should help bolster the housing market by increasing the amount for a federally guaranteed loan from $417,000 up to as much as $729,500, depending on the region of the country, which should eventually help increase the median home sales price in local markets, Thredgold said.
“That is a godsend to potential home sellers and buyers in California, parts of Nevada, parts of Arizona and parts of Utah,” he said. “If suddenly you can buy a house for $750,000 and get what is essentially a government-guaranteed mortgage at a lower rate, that helps our real-estate market, and it helps a lot of markets around the country.”
Lenders made 14 percent fewer loans in 2007 than they did in 2006, according to the Mortgage Bankers Association in Washington. They made 28 percent fewer jumbo loans, which cover up to $417,000 of a home’s value, according to Inside Mortgage Finance, an industry newsletter based in Bethesda, Md.
Lawrence Yun, the national trade group’s chief economist, also attributed the declines in median prices to mortgage market problems that mushroomed last fall, making loans more expensive for borrowers looking to take out “jumbo” mortgages larger than $417,000, the maximum size of mortgages that government-sponsored mortgage companies Fannie Mae and Freddie Mac can purchase and market as securities.
“The continuing crunch in the jumbo loan market that began in August has disproportionately reduced the number of transactions in higher price ranges,” Yun said in a statement.
Nationwide, existing homes sold at an annual rate of 4.96 million units in the fourth quarter, down 21 percent from the sales pace of the fourth quarter in 2006, the Realtors group said.
The states suffering the biggest drop in sales in the third quarter were Nevada, down 44 percent, and Wyoming, down 42 percent. Other states in addition to Utah with big declines were New Mexico, down 39 percent, Oregon, down 38 percent, and Arizona, down 37.6 percent.
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