Utah real estate market is unclear

SALT LAKE CITY — If you have been involved in or observed the Utah real estate market over the past couple of years, you are keenly aware that it has seen better times. But compared to many other states across the country, the Beehive State is not faring all that badly.

It is with a sense of uncertainty and pragmatic realism that had many industry insiders attending the Real Estate, Development and Construction Lending Summit on Wednesday at the Salt Palace Convention Center wondering "what's next" for Utah's real estate industry.

An audience of about 200 people listened to local analysts and association leaders express their thoughts on how the market arrived at its current state and where it could be headed.

"All the things you want to occur in a down cycle like this are taking place," Michael Castleman, executive vice president of national housing research firm Metrostudy said. The market is stabilizing itself by eliminating excess inventory, forcing prices down and pushing weaker players out, he added.

"We're not sitting on our hands and hoping that the market will (magically come back)," Castleman told the Deseret News.

He said that while the market is working through its problems, some issues still need to be addressed, including the exorbitant price many developers paid for land during the real estate boom just a few years ago, making new residential construction exceedingly tough in today's struggling market.

"In very simplistic terms, too much money was chasing too few deals," Castleman said. "Too much debt was embraced on asset values that really weren't sustainable."

He noted that the Utah market likely will continue to experience some economic difficulties through much of 2010. And while state government incentive programs implemented last year to assist first-time homebuyers were successful, the market will eventually have to be allowed to correct itself without outside intervention, meaning government incentives.

The state's top banking official agreed.

"At some point, the private (sector) needs to step back in and do what it does best," said Ed Leary, Utah commissioner of financial institutions. He said the challenge will be in deciding when to begin transitioning the market from incentive-driven to industry-driven.

The president of the Utah Association of Realtors said the outlook for Utah's real estate market this year is still not clear.

"If (government-driven incentives) exit the market in a way that is market-friendly, and people understand that the adjustment is coming … the transition will be really good," Lerron Little told the Deseret News.

"I'm optimistic that it can be done in an efficient way and that our markets will adjust (appropriately)."

e-mail: jlee@desnews.com