This is an archived article that was published on sltrib.com in 2007, and information in the article may be outdated.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.
As expected, Utah's red-hot housing market is cooling off, and builders are offering up goodies such as free appliances and luxury vehicles in a bid to reel in buyers.
The freebies represent an abrupt change from the past two years, when builders along the Wasatch Front have not had to offer much of anything to entice buyers. Utah's economy has been among the strongest in the nation, with stellar job growth and population gains, both of which bode well for builders.
More than two months into 2007, Utah's economy remains strong, but the housing market is losing steam. Inventories are growing. Homes, both new and used, are staying on the market longer. And appreciation has slowed.
As a result, "you're going to see a lot more incentives now," said Gary Cannon, president of the Salt Lake Board of Realtors.
Looking for a little luxury? How about a free lease on a luxury sedan? Or if you're in the mood for something more practical, you could always elect to have your builder pay your mortgage payments for six months or to fill your home with a slew a freebies such as a washer and dryer, security system or refrigerator.
The incentives, worth in some cases tens of thousands of dollars, stem from a steep drop in demand for new homes.
Home builders have taken out permits for the construction of 1,846 new single-family homes along the Wasatch Front since January, a surprising 37 percent drop compared with nearly 3,000 in the same period last year, according to Construction Monitor, a service that tracks home-building activity.
All builders are probably feeling the pain, although many, including Utah-based Ivory Homes, declined to be interviewed about the slowdown.
To spur sales, Hawkins Homes & Communities in North Salt Lake said it began advertising a "free" Lexus IS250 on two billboards in Davis and Salt Lake counties earlier this month.
The fine print says that buyers who meet certain criteria get a free one-year lease on the luxury sedan. (They can also elect instead to get a $10,000 kitchen or bathroom upgrade.)
The builder, which has subdivisions in Draper, Herriman and Fruit Heights, said it will offer the incentive through end of the month.
"It captures people's attention," said Jeff Macfarlane, sales and marketing director.
Sage Builders, which is building in south Salt Lake County and Utah County, was offering $5,000 off closing costs to buyers who use a "preferred lender."
Now the company is offering buyers who meet certain criteria "zero down" and no mortgage payments for six months, said Juliette Beckstrand, marketing director for Sage Builders, which is based in Draper.
"It's our biggest promotion ever. We wanted to do something important that would really help people get into a home."
Cannon of the Board of Realtors said it's important to read the fine print. Some of the best incentives are those that cover closing costs or provide a great mortgage rate. Extras and upgrades added at no cost are another great option, he said.
The biggest savings can be on speculative houses built without a contract. Builders in some cases are so eager to unload these properties they will offer an assortment of sweeteners.
Richmond American has been offering buyers of "quick move-in" homes a host of extras, such as appliances, security systems, garage door openers and upgraded landscaping. The builder also has been offering buyers discounted mortgages and reduced closing costs in certain circumstances.
Although some might see the assortment of incentives as a sign of a real estate market going bad fast, economist Mark Knold with the Utah Department of Workforce Services doesn't see it that way.
Utah's economy remains strong, and the steady job growth and population growth the state is experiencing will continue to boost the real estate market, he said.
But there could be a number of factors causing the slowdown in housing sales, he said. Slowing employment growth certainly could be one factor. Another could be the rapid appreciation of the past several years.
Home prices are up significantly over those of even a year ago in many areas. Mortgage rates are a bit higher, too. Both affect affordability and the ability of many Utahns to buy a home.
Plus, some type of drop in building activity is almost to be expected after such high levels of building in recent years.
But a real estate disaster or huge downtown, as is being experienced in other parts of the country? Not likely.
"The economy is still going well," Knold said. "I don't see any reason for the real estate market to crash."
Jim Wood, director of the Bureau of Economic and Business Research at the University of Utah, also does not see doom, but he thinks Utahns should brace themselves for a more sluggish real estate market.
He isn't surprised that home building is slowing given that surrounding states such as Arizona and Nevada started to see that a year ago.
"It was only a matter of time before it happened here," he said.
Also inevitable, he said, is a slowdown in the resale market. When a residential market that has been booming starts to slow, the home building industry is affected first.
"Then you'll see the resale market hit next. You're going to see fewer sales, longer days on the market and lower price appreciation. It's coming."