Economist: Rising gas prices may be driving many home buyers away from Tooele County

Home sales are down across the state and nowhere is falling further than Tooele County.

According to a new report by the Salt Lake Board of Realtors, home sales in Tooele County fell 36 percent in the second quarter of 2008 compared to the second quarter of 2007 — a larger drop than in Salt Lake, Davis, Weber and Utah counties. For the same period, median sales prices in Tooele County declined 6 percent to $183,300 — again the largest drop of the five counties.

Kelly Matthews, chief economist for Wells Fargo & Company in Salt Lake City, said Tooele County’s decrease in home sales may be partly caused by rising gas prices.

“In a place like Tooele, gas prices are going to pose a problem in relation to someone buying a home, unless they plan to work in Tooele,” he said. “People used to be willing to buy a home in Grantsville and commute to Salt Lake for work, because the cheaper land prices and homes in Tooele County made the commute worth it. However, the higher gas prices now are really affecting commuting costs, and people really don’t want to spend that much on gas now.”

Matthews also attributes the drop in home sales to tighter lending restrictions, which make it harder for potential buyers to qualify for a home loan.

“People were getting loans who realistically couldn’t qualify under normal, traditional lending standards last year, and there were too many of those people out there who were receiving them,” Matthews said. “We ended up with a big affordability problem. The excessive lending is much of the reason why we got into this situation we’re in now, and why much of the subprime lending market doesn’t exist anymore.”

In Tooele and Grantsville, only 182 homes sold in the second quarter of 2008. Tooele’s second-quarter median home price was $180,000, which is down 6.4 percent from a median home price of $190,000 in 2007. Grantsville’s median home price fell to $218,000 for the second quarter, down 9.2 percent from a median home price of $240,000 in 2007.

Vicki Griffith, broker with Prudential Real Estate in Tooele, agreed that rising gas prices are to blame for the local housing market slowdown.

“Commuters who work in Salt Lake think we’re farther away than we really are, and with the high gas prices they’re not going to want to move someplace they think is farther away,” Griffith said. “What they don’t know is that it’s a shorter drive to Salt Lake from here because we don’t have the stop-and-go traffic that comes with driving from the suburbs, and it probably takes the same amount of gas either way. People also don’t know that we have UTA or carpools out here.”

Steve Goodsell, broker/owner for Re/Max Lakeside Realty in Stansbury Park, said the market has slowed, but not stopped, through the first half of this year.

“Our average number of days on the market is longer, but we’re still doing good and getting houses sold,” Goodsell said. “People also can’t price their houses at whatever high price they want, like they could a year or two ago.”

Matthews expects Tooele County home prices will continue to go down in the near future, but that the number of potential buyers will increase. However, he also predicts that despite the lower prices, many potential buyers will sit on the sidelines of the market, waiting to see how low prices can go.

“The solution to this would be home prices readjusting in relation to peoples’ incomes, and that’s a process we’re working through,” he said. “That’s why we’re seeing home prices get marked down. We’ve made significant progress in getting through this housing problem, but there will always be people out there who would like to buy a house but are waiting to see the prices go down even further.”

Salt Lake County home sales in the second quarter fell 28 percent from the same three-month period last year, while in Davis County sales fell nearly 26 percent. In Utah County, sales were off nearly 29 percent, and Weber County saw a 30 percent decline.

Doug Radunich: dougrad@tooeletranscript.com