Fewer Utahns Living the American Dream As Home Prices Hit All-Time High
By Jeff DeMoss, Standard-Examiner, Ogden, Utah
Aug. 3–SALT LAKE CITY -With home prices at an all-time high and climbing, ownership is becoming more of a dream than a reality for many Utahns, a leading Utah economist says.
Wells Fargo found that increases in home prices have outpaced Wasatch Front residents’ income growth by more than double in the past four years, according to research presented Thursday.
From the second quarter of 2003 to the same period this year, the median home price in Davis County rose more than 52 percent to $238,352, while the median adjusted gross income for married couples filing jointly was up slightly more than 17 percent to $67,720.
“Utah’s housing sector is facing a serious disequilibrium,” said Kelly Matthews, executive vice president and economist for Wells Fargo in Utah.
“Housing affordability along the Wasatch Front plunged about 22 percent during the past two years.”
Matthews calculated affordability by dividing average and median adjusted gross incomes by the amount of income required to qualify for a mortgage.
This year, median qualifying incomes have been above actual median incomes throughout the Wasatch Front, the study found.
The imbalance is largely to blame for double-digit drops in new building permits along the Wasatch Front in the second quarter of this year, which Matthews called a “correction by reduction in construction.”
“We’ll see some adjustment in pricing fairly soon,” he said.
To bring the market back into balance by mid-2008, average Salt Lake City prices would have to fall 7 percent, mortgage rates would need to fall slightly, and incomes would need to rise by 7 percent, Matthews said.
In the first quarter of this year, Utah had the highest rate of home appreciation in the country, with an average annual increase of 17 percent, according to the Office of Federal Housing Enterprise Oversight.
The state’s three metropolitan areas — Ogden-Clearfield, Salt Lake City and Provo-Orem — were all in the top five nationally.
Sterling Jenson, managing director for Wells Capital Management, said much of the appreciation has been driven by speculative investors from California and other states where real estate values are still much higher than in Utah.
Wells Fargo did not include Weber County in the study. Matthews said overall affordability has fallen in the Ogden area in recent years, but Weber prices have not increased as rapidly as in Davis, Salt Lake and Utah counties.
Local Realtors say Utah prices are still very attractive compared with other states and that the recent decline in sales has been due to a lack of inventory, not a shortage of shoppers.
“As far as affordability, we’re still great,” said Mary Hurlburt, president of the Weber/North Davis Association of Realtors.
“We’re seeing some more restrictions on mortgage companies due to foreclosures, but interest rates have stayed really low.”
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