Utah real estate market rebounding slowly, analysts say

SALT LAKE CITY — While some sectors of Utah's economy are slowly heading toward the rebound track, real estate is still not there yet. And some local analysts predict it may be a while before it finally finds its way back onto the road to stability.

Speaking at the Mid-Year 2010 Real Estate Summit at the Grand America on Monday, Zions Bank executive vice president Michael Morris said the Utah commercial real estate market may not even begin to recover until next year.

"This year I don't see much reason for optimism that we're going to have a big rebound in commercial property," he told the Deseret News. "More of a gradual recovery building into 2011 and 2012, but still with the backdrop of other (economic issues facing the industry).

Morris said the amount of debt used to finance projects prior to the economic meltdown has caused major problems for the commercial sector and there are no simple solutions that will resolve them anytime soon.

"It's more that we over-leveraged then we overbuilt," he said. "Over-financing and over-leveraging and over-engineering financial products is really what has led to an artificially highly valued market to begin with."

Morris said the Salt Lake central business district will eventually be helped by the development of projects like the City Creek Center and 222 S. Main, but there will also be challenges to contend with.

"They'll be competing with each other for much the same tenants and residents, but the primary benefit so far has been the employment that has come with the construction jobs," he said. "It remains to be seen how well all of that will … stay stabilized."

On the residential side, declining home values have pushed housing prices back to much more affordable levels, according to Zions Bank senior vice president Lee Carter.

"The lower end of the market (under $300,000) … is recovering," he said. "We've probably seen a bottom or very close to a bottom in that part of the market."

Carter described the middle part of the market as "a little bumpy" with the higher end "going to remain a mess for some time to come."

"We've just got too much high-end real estate in the state … and we just don't have people with the incomes and fundamentals that can support those higher payments," he said.

Carter said he expects the lower end segment to recover "fairly quickly," whereas the high end may be "a bit challenging."

He said prices on the more expensive unsold inventory are falling more dramatically — on a percentage basis — than any other segment of the housing market. Eventually, the market could see more foreclosures or short sales as those properties are no longer financially viable for their owners.

In the near term, he said, the market still has some work to do before it fully recovers.

"It's getting better and we're going to see that 2010 is going to be a good year … 2011 and 2012 are also going to be good years," Carter said.

"Land prices are down, affordability is good right now … so people are able to get back into those properties."

e-mail: jlee@desnews.com