Utah's fertile birthrate, coupled with falling mortgage rates, could spark a housing recovery in the second half of this year, a Wells Fargo bank economist said Tuesday.

Only 6,000 single-family home permits were issued in 2008, and the number probably will fall further in an economically tough first six months of this year, Kelly Matthews said.

But the number of building permits is less than half the number of households typically formed in Utah each year, leading Matthews to predict demand for new houses , spurred by falling prices and low mortgages rates, will pick up in the second half.

"If in fact we have approximately 20,000 new households (formed) per year, which has been typical in each of the past five years, you can see that if we are building only 6,000 (homes), very quickly we would have an insufficient supply to take care of our population needs."

Matthews and James Paulsen, chief investment strategist for Wells Capital Management, spoke to a private audience of business people at a breakfast meeting in Salt Lake City. The pair discussed the economic conditions they expect to see this year and how stock markets may respond.

Paulsen said markets probably will bounce upward in the second half of 2009. He and Matthews predicted the first six months will be difficult, but forecast that the U.S. and Utah economies will begin to grow again near summer's end.

In Utah, rates for fixed 30-year mortgages have fallen at least 1 percentage point, to about 5 percent, and could dive to 4.75 percent in next two months, Matthews said after the meeting.

Lower mortgage rates, combined with falling prices -- down about 8 percent in Salt Lake County last year -- could make homes easier to buy in 2009, Matthews said.

"That decline of 1 percent in mortgage rates is equivalent to another 10 percent in prices ," he said. "If you add those two things together, that would be approximately a 20 percent improvement in housing affordability."

Matthews predicted that Utah will lose 16,000 jobs in the first half of this year, double the number of lost in 2002, the worst year of the last recession.

Many of the lost jobs have been centered in the construction industry, and more layoffs are likely in the next few months.

But Matthews said if his analysis of housing demand is right, layoffs will slow in the second half.

"It's going to be tough in the first half, but there are two main things that give us optimism right now. One is these falling mortgage rates. The second is gasoline prices," he said.

"If we are able to have fixed 30-year mortgages below 5 percent and if gasoline prices stay in the $1.40 per gallon range, I think those two things will contribute significantly as we work our way through what undoubtedly will be a very difficult first half," Matthews said.

pbeebe@sltrib.com