Home prices have room to drop another 7 percent to 10 percent by year end

Utah County led the state with the biggest drop in the number of single family home sales in 2007 as buyers were sidelined by high home prices and tighter lending requirements in the wake of the subprime mortgage meltdown.

Poorer home sales statewide, combined with a 60 percent plunge in the number of builders' permits for new home construction along the Wasatch Front from September through November, are expected to lead to further home price reductions of between 7 percent and 10 percent by the end of the year, according to local economist Kelly Matthews of Wells Fargo & Co.

Home prices in Utah are going to have to drop further before the housing inventory surplus can be sold, and new home construction can pick up again, Matthews said to a group of around 800 real estate and business representatives at a breakfast Thursday at Little America Hotel.

At issue is reduced affordability -- a key factor putting pressure on home prices, Matthews said.

In recent years, a combination of factors including a strong local economy, real estate speculation and questionable mortgage lending standards helped create a price bubble situation that is "unrealistic and unsustainable when compared against real income and rental rates today," Matthews said.

According to the Salt Lake Board of Realtors, Utah County's home sales plunged nearly 25 percent to 4,514 from 6,014 in 2006, followed by a 23 percent drop in Salt Lake County. Sales were down 21 percent in Tooele County, followed by a 18 percent drop in Davis County and a 14 percent drop in Weber County.