Salt Lake housing likely to keep booming

Plunging housing sales and sagging values may mean the end to one of the nation's biggest housing booms, but Salt Lake City's hot housing market will likely continue to show double-digit price gains for at least another year, according to industry experts.

The Commerce Department reported that U.S. home sales in July fell 22 percent compared to July 2005. And new-home prices decreased 1.7 percent in July compared to June.

"We're going the other direction," said James Wood, director of the University of Utah's Bureau of Economic and Business Research. "We've had one year of really strong price increases. I think we have a ways to go. I think we have another year of double-digit growth."

At 14.68 percent in the first quarter, Utah ranked 15th among all states in highest house-price appreciation rates, according to the U.S. Office of Federal Housing Enterprise Oversight. Second-quarter rankings are set to be released Tuesday.

However, while home values and sales in nearly all Wasatch Front communities are soaring, Utah's real estate market is not immune from a national slowdown.

New construction in the state in the first seven months of 2006 is down about 1 percent compared to the same period in 2005. And in the greater Salt Lake region, finished unsold vacant home inventory, which includes single-family and multifamily units, rose to 1,492 units in the second quarter, a 29 percent increase from 1,156 units in the first quarter, according to Metrostudy, a Houston-based real estate research firm with offices in West Jordan.

A June report by National City Corp. revealed that 71 of 317 metro areas across the country were considered "extremely overvalued" in this year's first quarter, having appreciation rates in excess of 34 percent.

St. George ranked among those areas considered extremely overvalued. The Salt Lake metro region, while considered overvalued by the report, only carried an 8 percent housing premium. Just 18 months ago, Salt Lake was considered one of the most undervalued real estate markets in the country.

Still, for people like Jeff Arnett, a 36-year-old software engineer who lives in Fort Collins, Colo., Utah real estate remains a bargain.

Arnett purchased a second home in Provo as an investment in 2005. He currently is looking to buy land.

"Utah is still cheaper than most other places," Arnett said. "It's high, but it's not that high. I think there is still a lot of undeveloped, emerging markets. There's a lot of 'no growth' initiatives in Colorado, where there doesn't seem to be any in Utah."

Arnett said he took a big hit in the 2000 stock market crash, but he thinks real estate remains one of the safest investments.