Appreciation: The Utah real estate market has inched up to No. 37
By Lesley Mitchell
The Salt Lake Tribune
Salt Lake Tribune

After years of having one of the nation's weakest real estate markets, Utah no longer trails most other states in home price appreciation.

The selling price of Utah homes rose nearly 5.3 percent in the last quarter of 2004 compared with the same quarter a year earlier, ranking the state No. 37 among all states in appreciation, according to a report released Tuesday by the Office of Federal Housing Enterprise Oversight.

The highest increase was in Nevada, where home prices rose 32.4 percent during the same time period. Indiana was last with appreciation of 3.7 percent.

Utah's ranking is well below the national average of 11.2 percent, but it is a marked improvement from its position at or near the bottom of the list, where Utah has lingered for years even as the nation's housing markets have heated up.

"The real estate market along the Wasatch Front right now is hot," said Midvale Realtor Jaren Davis, president of the Utah Association of Realtors. "I tell people it's a good time to buy because you'll see some good appreciation over the next five to 10 years."

Davis said home prices in all the most populated areas of the state - Park City, St. George and the Wasatch Front - are rising after years of little or no change.

Salt Lake City economist Jeff Thredgold predicts appreciation along the Wasatch Front will average 7 percent to 10 percent this year. He believes owners of homes valued above $250,000 - who especially have seen little if any appreciation over the past several years - will see significant gains in the coming years.

Stronger job growth is one factor that will lead to gains, said Thredgold, a consultant to Zions Bank. Another factor is the affordability of Utah real estate compared with surrounding states.

"There is growing recognition that Utah's real estate is dirt cheap compared with Las Vegas and much of California and Colorado," Thredgold said.

Bountiful Realtor Sharon Spratley said another factor driving appreciation in Utah has been low interest rates, which give buyers more purchasing power. Although mortgage rates are expected to increase in the coming years, many economists say mortgages are expected to remain affordable.

The Office of Federal Housing Enterprise Oversight, created to oversee the safety and soundness of mortgage funds providers Fannie Mae and Freddie Mac, tracks appreciation by measuring price changes of individual properties as they are sold and refinanced over the years. Many economists consider this method of determining appreciation to be more accurate than other methods.

While Utah's appreciation trailed most other states in recent years, in the early to mid-1990s, the state led the country in home-price increases as Utah's economy thrived and substantial numbers of people moved to the state.

But in the late 1990s, Utah's economy slowed, thousands of people lost jobs in corporate layoffs and fewer people moved to Utah. As a result, appreciation also slowed and in some neighborhoods stopped altogether.

While Utah's real estate market is improving, it still is surrounded by states with much higher appreciation. Nevada is No. 1 with 32.4 percent appreciation, followed by Arizona (No. 10, 14.5 percent); Wyoming (No. 17, 11 percent) and Idaho (No. 22, 10.3 percent). Colorado trails Utah. Ranked No. 47, Colorado had appreciation of only 4.18 percent over the past year.

Among metropolitan areas, Salt Lake City and Ogden also are no longer at the bottom of the list of 265 communities ranked by the federal agency. The Ogden-Clearfield area is ranked No. 238 among 265 metropolitan areas nationwide, with appreciation of 3.2 percent from the fourth quarter of 2003 to the same period in 2004. Salt Lake City scored better, at No. 156, with appreciation of 5.6 percent. Provo-Orem, however, was ranked No. 241 with appreciation of 3.1 percent.
lesley@sltrib.com