While St. George was riding the wave of spectacular economic growth also seen in neighboring Nevada and Arizona, construction of residential homes became a major factor driving that economic prosperity, he said.

Now that the market has softened, the housing market is "seeing the most stress," Matthews said.

In 2005 and 2006, in what many people in Washington County now refer to as the "boom years," appraisers and loan processors worked at a frenetic pace, trying to keep up with the demands of a real estate market that consistently brought fame to the county as a top 10 of one sort or another.

The number of building permits issued in Washington County increased from 1,561 in 2001 to 3,479 in 2005 before taking a tumble in 2006. That year, building permits dropped by 47 percent to 1,845 — with another 23 percent drop in 2007, when just 1,422 permits were issued.

Allan Carter, developer services director at Southern Utah Title Co., said that so far this year, building permits are continuing their downward slide and are estimated to finish the year another 56 percent off the previous year's mark, with only 600 permits expected. That's less than half the number of permits issued even in the tamer market years in the late 1990s.

But Carter said he thinks the worst is yet to come.

"The typical homeowner's house is worth a lot less now than it was a year or two ago," he said. "People can buy a foreclosed home for so much less than new homes. They're priced 20 percent to 30 percent less than what you can buy it for new."

Declining prices

Lori Chapman, president of the Washington County Board of Realtors, said the amount of inventory in the sub-$400,000 price range is beginning to "level off" and is being absorbed by the market. But the higher priced properties are not selling nearly well as they were just a year ago.

"We went up so far and so fast that it was really unsustainable," she said. "We've been in the adjustment period, and we still are, because of the supply and demand issues."

Chapman said homebuyers in the St. George market likely would have to be willing to stay in the market for at least three years to realize a gain on their property investment.

Data from research firm Metrostudy shows that the median sales price for new homes in St. George began declining in the third quarter of last year. Median prices fell from $421,100 in second quarter 2007 to $418,900 in the third quarter, following nine consecutive quarters of sales price increases.

The median new home sales price declined again in the fourth quarter of 2007 to $399,300 and went down to $385,000 in the first quarter of 2008.