Utah home prices increase despite the national decline

Home prices in 20 U.S. metropolitan areas fell in October by the most in at least six years, raising the risk that more Americans will walk away from properties that are worth less than they owe.

In sharp contrast, the Beehive state has maintained strong growth, with home prices in Utah increasing 12.9 percent from the third quarter of 2006 through the same period in 2007, according to the U.S. Office of Federal Housing Enterprise Oversight.

"The markets that have the weakness are essentially the ones that went too far too fast," said Zions Bank chief economist Jeff Thredgold.

He noted that California, Arizona, Nevada and Florida have seen unprecedented growth over the past five years, and now those states are seeing some market correction, which has created some significant declines.

"Somebody who bought a home in San Diego or Naples, Florida or Phoenix or Las Vegas 12 to 15 months ago is under water on it," Thredgold said Wednesday. "But the vast majority of homes are owned by people who have been in them for five, six or seven years or more, and those people are still sitting on some very attractive appreciation."

In Utah, the Provo-Orem metropolitan area saw the greatest home price growth, rising 14.3 percent from the third quarter of 2006 to third quarter 2007, according to the OFHEO data. Provo-Orem was followed by Ogden-Clearfield, which had a 13.9 percent increase, and Salt Lake City, where prices were up 13.3 percent.

Nationally, values fell a greater-than-forecast 6.1 percent from October 2006, the S&P/Case-Shiller home-price index showed Wednesday. The decrease was the biggest since the group started keeping year-over-year records in 2001.

Prices will continue falling as record foreclosures put even more homes on the market, while stricter lending rules make financing tougher to get. Declining values also pose a risk to consumer spending by making it harder for owners to tap home equity for extra cash.

"You are likely to see more people giving up on their loans as they end up with little or no equity in their homes," said Abiel Reinhart, an economist at JPMorgan Chase & Co. in New York. "It's one more factor that weighs on the path of consumption."

Compared with a month earlier, home prices dropped 1.4 percent, the biggest one-month decline since records began. The figures aren't seasonally adjusted, so economists prefer to focus on the year-over-year change.