Utah No. 1 in rise of home prices

Utah continued to outperform the rest of the country in home-price growth late in 2007.

The state topped the national rankings by having the highest percentage change in home prices year over year during the fourth quarter, according to a report released Tuesday.

Yet another report issued this week showed that sales of existing homes and condominiums in Salt Lake County were down 22 percent in January, compared to a year earlier, representing the lowest monthly sales activity in eight years.

The Tuesday report by the Office of Federal Housing Enterprise Oversight, the Beehive State came in first of all 50 states and the District of Columbia with a one-year home-price increase of 9.27 percent. Neighboring Wyoming came in second at 8.27 percent and North Dakota was third at 7.87 percent.

Montana at 6.90 percent and Alaska at 5.97 percent rounded out the top five.

"That shows you how strong our housing was," said Well Fargo economist Kelly Matthews. But he added he would have preferred to see the Utah one-year change come in a bit lower — at around 5 percent — because it would have indicated a trend toward getting the state's housing prices more aligned with household incomes.

Matthews cautioned he believes the housing market will likely start to see some price declines in the 2008 first quarter.

"When the first quarter comes out, I think we'll actually be a negative number versus the first quarter of 2007," he said. "To achieve affordability, the only way to make the adjustment is for prices to slip down a bit."

"Over the next six months, we will see a noticeable markdown of some of these homes in order to reduce the excess inventory sold," said Matthews. "On a year-over-year basis, by mid-year 2008, we'll be 6 to 8 percent down from the previous year."

On a national scale, U.S. home prices dropped 8.9 percent in the final quarter of 2007 compared with a year ago, Standard & Poor's said Tuesday — the steepest decline in the 20-year history of its housing index.

The S&P/Case-Shiller home price indices, which include a quarterly index, a 20-city index and a 10-city index, reflect year-over-year declines in 17 metropolitan areas, with double-digit declines in eight of them.

The 10-city index also set a record annual decline of 9.8 percent in December, while the 20-city index dropped 9.1 percent.