This is an archived article that was published on sltrib.com in 2007, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

In 2007, builders have taken out permits to build 6,875 houses, down 29 percent from 9,707 permits during the same time period in 2006, according to Construction Monitor, which tracks such activity.

Economist Kelly Matthews contends that a steady stream of double-digit increases in appreciation in recent years has left many Utahns struggling to be able to afford a home despite Utah's booming economy and historically low interest rates nationwide.

"It's not an economy problem or a mortgage rate problem," he said at a news conference Thursday. "It's a pricing problem. We have seen a tremendous decline in affordability."

As an example, he points out that a family with an annual income of $51,000 in 2003 could have purchased a house valued at Salt Lake County's average sale price of $187,000 with a 5 percent down payment. The buyers would have had a monthly payment of $1,300, with interest rates at the time in the range of 5.4 percent.

In the second quarter of this year, a family would have needed an annual income of nearly $90,000 to purchase a house priced at Salt Lake County's average of $298,000 with a 5 percent down payment. The monthly payment would be about $2,250, Matthews said, with interest rates of 6.5 percent.

The problem is that most families did not nearly double their incomes over the past four years, he said.

Kristin and Chad Stocking of Sandy said they certainly haven't. The couple, who moved from the Denver suburb of Aurora late last year, struggled to find a house in the Salt Lake City area they could afford.

They had hoped to find a variety in their price range of $175,000.

"We learned pretty quickly that there wasn't much in that range," Kristin Stocking said. "We love the Sugar House area, but that was out, and even [the] Liberty Park [area] was out, which was a shock to us."

Their real estate agent found a fixer-upper in Sandy for $183,000 - a bit out of their price range but one that was made possible through a low-interest rate loan from the Utah Housing Corp., which aims to help those who are having trouble buying a home.

"It was definitely a fixer-upper," Stocking said. "It has only 1,600 square feet, there's no garage and the basement isn't finished. But we feel lucky to have a home."

Matthews said a drop in new-home construction this year is only the first sign that affordability is becoming a big issue for home buyers, particularly those buying their first home.

"At some point, [the decline in home sales] will be accompanied by a decline in prices," he said. He said he did not know by how much, although most economists agree prices will not plummet.

Data from the Salt Lake Board Realtors shows that although housing prices are still appreciating in most areas, unit sales of resale homes are down significantly from last year, supporting Matthew's belief that home prices along the Wasatch Front will moderate and even decline at some point. In other markets with significant run-ups in home prices over several years, including Arizona and Nevada, prices eventually fell after demand slowed.

Sterling Thomas, vice president of mortgage banking for the Utah Housing Corp., said he isn't surprised about concerns over affordability issues. He's noticed that more buyers in recent years have turned to condominiums for their cheaper prices.

"Many people cannot afford a single-family home anymore," he said.

Sterling Jenson, regional managing director of Wells Capital Management, said tighter lending standards are also contributing to the affordability dilemma. In the wake of the nation's subprime lending crisis, in which lenders made too many loans to high-risk borrowers, who are going into default in record numbers, borrowing standards have become more strict. "There are people that just don't qualify [for a home loan] now," he said.

An affordability comparison in Salt Lake County

* In 2003, a household with an annual income of $51,000 had enough buying power to afford an average-priced home of $187,000, with a 5 percent down payment

* In 2007, a household would need an annual income of $90,000 to afford an average-priced home of $298,000, with a 5 percent down payment

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