Sales & Price Activity
After seeing record years in both sales and price growth, each of the economists interviewed agreed that Utah real estate will see some stabilization in 2008. Yun says he expects Utah sales activity to slow or moderately decline next year, but also says sales may stabilize in 2008 after problems in the credit markets have been resolved and funding returns.
"In Utah, you're going to see home sales at a lower, more sustainable rate, but they aren't going to falter," said Jeannine Cataldi, senior economist for economic forecasting firm Global Insight. She expects activity to pick up once people know the full extent of the mortgage crisis, which is expected to peak in 2008. "Once we know how that plays out, people can make decisions and move forward," Cataldi said.
The more debatable subject is what will happen with home prices. Some economists expect to see single-digit price growth in 2008 while others expect slight price declines. Yun says he wouldn't be surprised to see Utah prices rise 7 to 10 percent in 2008 because of the strong job and population gains in the state. "Utah is clearly the out-performer in 2007 in price growth," Yun said. "I think that momentum will carry into 2008," but the current rates of price growth won't be sustainable over the next year. Cataldi agrees. She says she expects prices to continue to rise but at a reduced rate. Some local economists, however, see a slightly different picture.
Mark Knold, chief economist for the Department of Workforce Services, says he predicts prices will probably come down a little because he thinks, "prices are flirting above what this market can afford even in the face of good wage gains." Kelly K. Matthews, Wells Fargo's executive vice president and senior economist, also says Utah has an affordability problem, which is why he expects prices to be down 6 to 7 percent in mid-2008. "I believe we are so far out of equilibrium, I do not believe we can avoid some reduction in prices."
At the same time, Jeff Thredgold, economic consultant to Zions Bank and president of Thredgold Economic Associates, sees price activity varying depending on the market segment. According to Thredgold, lower-end properties in the $175,000 to $300,000 range should increase approximately 7 to 10 percent. Some homes in the $300,000 to $500,000 range should see price gains of about 5 percent while others may see a slight decline. The real concern is the market for $500,000 and above properties; people may have to cut prices, and there may be areas that have to come down 5 to 10 percent, he says. "All real estate is local," Thredgold said. "In certain communities, it will do well, but in some areas, prices may have to come down."