Despite a strong economy and a housing market in far better shape than most other states, Utah's homebuilders are entering uncertain times.
An audience of local homebuilders and suppliers listened intently to an economist and a market analyst discussing the state's current real estate market and its impending future.
"The market is definitely going through some changes," said Eric Allen, director Utah/Idaho region for market research firm MetroStudy during the gathering in the auditorium of the Salt Lake City's main library on Wednesday. "We're getting back into what we consider a more normal market."
He added the area is coming off record years in the number of homes constructed and sold, but now the market has come to a point where those homes need to be absorbed in order for the market to move forward.
"We're going to go through the process (over the next 12 to 18 months) of cleaning that inventory up and getting it down to a more normal level," Allen said.
Along the Wasatch Front, the inventory of newly constructed finished vacant homes is around 32 percent. He said 20-25 percent is typically considered healthy.
"Right now is definitely a good time to buy a house," he said. "You can get incentives from the builders, you can find price reductions on a lot of the standing finished inventory."
Wells Fargo vice president and economist Kelly Matthews said he believes the market could see home prices decline about 7 percent by the middle of next year as builders feel pressure from debt on unsold inventory.
"I don't know how fast or how soon or how much it's going to take in order to get this backlog of homes sold so that we can begin to start building new homes," Matthews said.
He predicted the number of home building permits may decline as much as 50 percent in the coming year as builders adjust to the changing market.
Homebuilder Paul Magleby, president and CEO of custom home builder, the Magleby Companies, agrees that such predictions only seem logical.
"I think if everybody is sensible about the way they go forward. The builders are (by virtue of lending requirements) going to slow down their production," Magleby said, adding that the market will come to equilibrium at some point in time.
Mableby said the mortgage industry is also in the process of revamping in the wake of the recent lending debacle and he hopes lenders develop programs to help more people keep their homes rather than risk massive foreclosures or a government bailout of the mortgage industry.
In response to the notion that many potential homebuyers are waiting to find out if housing prices will fall, Magleby said, "That's human nature, they're going to pull back to see if they can get a better deal.""But the best deal might be right now," he said because homebuilders can capitalize on lower lumber prices and better rates from their contractors needing work right now.
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