Both Utah County and the state are leading the nation with double-digit gains in home prices, but those days may be numbered.

Even though a federal report Thursday said small towns like Provo-Orem bucked the national housing slump with a whopping 18.2 percent gain in home prices in the second quarter, local Realtors say this situation isn't likely to sustain itself.

Rising inventories of homes for sale -- especially those priced at $300,000 and above -- could take some steam off the hot housing market here, according to the Utah County Association of Realtors.

Median list prices of all types of homes in Utah County fell to $305,000 in July from $319,900 a year ago. Median sale prices gained 14 percent in July to $223,000 from a year ago, but have held steady since June, according to the latest data from the group.

Statewide, home prices grew 15.3 percent in the second quarter ended June 30 compared with the same period a year ago -- marking the third consecutive year Utah has topped the nation for home price appreciation, according to a report released Thursday by the Office of Federal Housing Enterprise Oversight, a government agency that tracks housing values.

Real estate experts cite the state's strong economy and continued job and population growth as factors helping Utah avoid one of the country's worst housing downturns to date.

Also significant is the fact that Utah wasn't part of the national housing boom that began in early 2000 and the speculation that had followed, allowing the local market here to play catch-up for the past three years.

Price slowdown aheadfi

"But we've definitely moved away from the sellers' market," said Kevin Call, executive vice president of the Utah County Association of Realtors. "We don't have enough affordable inventory under the $250,000 price range. We expect that if the trend continues, there will be more price negotiation for homes over $400,000."

More buyers are getting sidelined by a double whammy of higher mortgage rates and rising house values outpacing that of wage growth in Utah County in the past few years. Tighter lending requirements, which means more people are failing to qualify for home loans, also compounded the situation.

Therefore, home prices in Utah County, and statewide, may start to see single-digit growth instead of double digit growth over the next year, Call said.

Indicative of slowing sales is the increase in the number of months of supply in July compared with the previous two quarters, he said.

According to Utah County Realtors, the number of homes available for purchase and under contract listing is up 51 percent to 5,182 units in July from a year ago -- an all-time high since the group began tracking home values in 1995.

In Utah County, the amount of time it would take to sell single family homes that cost between $300,000 and $500,000 increased to 13.2 months in July from 6.4 months in November 2006. The amount of time it would take to sell homes that cost over $1 million jumped to 30.7 months in July from 15.8 months in November 2006.

The ratio of sales to listings also dropped to 10.4 percent in July from 20 percent in 2006. That meant, one home sold for every 10 homes listed in July, as opposed to last year, where one home sold for every five homes listed, Call said.

But some real estate agents see this glut in inventory as a temporary one.

While tighter lending requirements and affordability issues continue to create uncertainty in the market, the overall economy and homebuying demand remain strong in Utah, said Jaren Davis, vice president of Coldwell Banker Residential Brokerage.

"We didn't have the overinflated prices that Nevada and Arizona saw, and our economy isn't weak. There will be a softening in the market, but the long term fundamentals suggest we'll absorb that inventory," he said.

Nationally, home prices were "basically flat in the second quarter despite tightening credit policies, rising foreclosure rates and weakening buyer sentiment," said James Lockhart, director of the Office of Federal Housing Enterprise Oversight.

"Significant price declines appear to be localized in areas with weak economies, or where price increases were particularly dramatic during the housing boom," Lockhart said. States that had seen some of the nation's most dramatic increases in homes prices in the past three years include Nevada and California. But that situation has since changed in recent months, with Nevada reporting a 1.5 percent drop in home values in July, and California, a 1.4 percent decline.

This story appeared in The Daily Herald on page A1.