Utah's home values continue to tumble

Utah's home values continue to tumble
National trend » From lofty heights, state shows one of the biggest drops.

By Lesley Mitchell, The Salt Lake Tribune
Posted: February 24, 2009

Utah's home-price appreciation, among the highest in the country less than three years ago, now is 16th worst among all states.

Home values dropped 6.6 percent from the fourth quarter 2007 to the fourth quarter 2008, according to a report issued Tuesday by the Federal Housing Finance Agency, which tracks state values based on appraisals made during home purchases.

Utah is among 44 states with a home-price decline -- or negative appreciation -- during that time period. Nationwide, home values were off an average of 8.3 percent, according to the agency's House Price Index report.

The falling prices are affecting Utahns in different ways. Some owners, especially those who purchased in the past year or two, now owe more than their homes are worth. As a result, many are being told they cannot refinance their properties; others cannot sell them without a short sale, in which a lender agrees to accept less than it is owed.

Some owners, such as Jeff Chatelain of Salt Lake City, are being cut off by worried lenders from their home equity line of credit -- an important source of financing in a crisis.

Chatelain said he's also trying to sell a home he and a friend had built in hopes of selling at a profit. When it was finished early last year the property appraised at $1.2 million; today he thinks he'd probably get about $850,000 -- if he found a buyer.

So he's renting out the home, waiting for a recovery. "Maybe next year, things will be better."

But will thing turn around next year? Economists have predicted a rebound in Utah may not begin until after 2010. Even normally optimistic real estate professionals aren't sure the market -- and specifically in the Salt Lake area -- will recover anytime soon.

"We know at some point home prices will stop falling, we just don't know when," said Ryan Kirkham, president of the Salt Lake Board of Realtors. "At this point, we're just hoping for the best."

In the report released Tuesday, the biggest drop in home values was in Nevada, which registered a 28.2 percent decline in the year-over-year period, followed by California (25.5 percent), Florida (24 percent) and Arizona (20.6 percent). Utah fared better than Oregon, where prices fell by a higher margin -- 7.1 percent -- but was slightly worse than neighboring Idaho (6.5 percent).

Among nearly 300 metro areas, Logan ranked No. 32, with a home-price increase of nearly 2 percent. Decatur, Ala. was No. 1, with a 6.6 percent increase.

Salt Lake City ranked a much-lower No. 171, with a 3.4 percent decline in prices, followed by Provo-Orem, at No. 191, with a 4.5 percent decline. St. George ranked a dismal No. 248, with a 13.3 percent drop in prices. In the metro areas, rankings are based on appraisals made during home purchases and refinancings.

Utah's comparatively low rankings contrast sharply with its stellar performance less than three years ago. The state first topped the nation in appreciation in the fourth quarter 2006 and remained at either No. 1 or No. 2, with double-digit annual increases in home values, until late 2007.

By last year, smaller appreciation numbers gave way to no appreciation, and now, falling prices.

"Conditions have deteriorated in Utah," said Andrew Leventis, senior economist with the Federal Housing Finance Agency. He noted, however, that very few areas of the country have escaped the effects of the housing downturn.

Even North Dakota, which tops the nation in home price appreciation, saw a less-than 2 percent increase in values in the past year. Aside from Wyoming, which had a 1.5 percent increase, all other states either had no appreciation or various degrees of home-price declines.

As in other parts of the country, Utah's housing downturn stems from tighter lending standards put in place after the subprime lending crisis. And despite low mortgage rates, years of home-price run-ups in recent years have put home ownership out of reach of many Utah families.

Adding accelerating job losses, plunging stock prices and an overall weak economy to the mix hasn't helped. In fact, even those with the means to buy a home are putting off purchases out of the expectation prices will fall even more.

lesley@sltrib.com