Luxury-home glut

Utah's high-end housing market is out of balance, with simply too many houses for sale that are priced $500,000 and above, local economists and real estate analysts say.

While the nation's housing market has experienced steep declines, the value and number of homes sold along the Wasatch Front have been fairly strong compared to other areas. But a significant number of high-priced homes are remaining on the market.

Along the Wasatch Front, more than 1,500 homes priced over $500,000 are currently for sale, according to the Multiple Listing Service.

About 36 percent of new single-family homes for sale in the greater Salt Lake area were listed at $400,000 and above in the fourth quarter of 2007, and 22 percent are priced $500,000 or more, according to Metrostudy, a Houston-based company with offices in West Jordan. In 2003, just 7 percent of the local housing inventory was priced $400,000 or more.

"With the upper-end market, here's the glut of inventory," said Jason Eldredge, executive vice president of sales for NewReach, a Salt Lake-based real estate research firm. "If you're a buyer, you love to hear this, but if you're builder, you'll hate it."

The glut of high-end houses is slowing Utah's entire housing market, he said. Because fewer people are able to obtain the loans necessary to buy high-end homes, people who own less-expensive homes can't move up to the costlier ones and are staying in their current homes, he said. That means there are fewer less-expensive homes available for first-time homebuyers.

Analysts say the boom in the high-end housing market in recent years was due to ready availability of credit, as well as investors or speculators who were looking to turn quick profits and builders who may have gotten carried away with trying to meet what they believed would be a demand for bigger, pricier homes.

"The exacerbation of the whole issue was that builders were building to these $450,000 price points on average, and buyers were affording it," said Curtis Dowdle, executive officer with the Salt Lake Home Builders Association. "Then all of a sudden, we have the subprime meltdown and those loans ceased, and affordability became a real issue."

As defaults nationwide began rising last summer among borrowers with weak credit, lenders backed off from all but the safest mortgages, and many lenders making "jumbo" loans demanded that borrowers pay higher rates. "Jumbo" loans were those above the $417,000 individual limit for home mortgages that mortgage giants Fannie Mae and Freddie Mac were allowed to buy.