Housing prices soar 17.4%, showing Utah's rapidly appreciating market

Utah home prices climbed 17.4 percent in the third quarter, the second-highest appreciation rate in the nation, according to a report by the U.S. Office of Federal Housing Enterprise Oversight.

In the second quarter, Utah ranked 10th in the nation in house-price appreciation. But in the most-recent quarter, the Beehive State's appreciation rate was second only to Idaho, which showed a 17.5 percent increase compared to the third quarter a year earlier.

The OFHEO House Price Index tracks average house price changes in repeat sales or refinancings of the same single-family properties.

While home prices in Utah continue to show dramatic gains, there are signs that sellers may have to more competitively price their homes as fewer sales begin to take hold. Home sales were down 6 percent statewide in the third quarter, according to the Utah Association of Realtors. And in the same quarter in Salt Lake County, homes sales fell 11 percent, according to the Salt Lake Board of Realtors.

Falling sales could mark the first signs of a shift from a sellers' market to a buyers' market.

The OFHEO report said Utah's high appreciation rate, as well as rates in a handful of other states, appear to be the exception. Across the nation, home prices rose 7.7 percent in the third quarter, their slowest pace since the second quarter of 1998.

Kelly Matthews, executive vice president and economist at Wells Fargo in Salt Lake City, said he was hoping Utah's appreciation rate would have slowed in the third quarter.

"I think that we would be better off with single-digit appreciation, something closer to the national average," Matthews said. "We are going to have some adjustment in the number of homes being built and the number of homes being sold."

That said, Matthews continues to be optimistic about Utah's housing sector, saying the state is not "overbuilt."

"It will be easier to absorb them if we can afford them," Matthews said. "Hopefully we don't have a big adjustment in Utah."

Ron Taylor, a real estate agent specializing in selling higher-priced homes with AllPro Realty Group in Salt Lake City, said more expensive homes are taking a little longer to sell.

"The sellers are a little bit more flexible on the prices," Taylor said. "But they are still selling well."

Taylor said Utah's slowdown is due to two reasons: the winter season and the effects from the national slowdown.