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Lower prices and a slew of home-buying incentives can help only so much.
Builders along the Wasatch Front have taken out permits for the construction of 1,280 single-family homes so far this year, down one-third from 1,931 last year and a high of 6,892 in 2006, according to Construction Monitor, a service that tracks home-building activity in the West.
The drop comes even as the federal government is dangling an $8,000 tax credit to buyers who haven't owned a home in the past three years and the state has been handing out $6,000 grants as an incentive to get Utahns to buy one of the many newly built-but-unsold homes languishing on the market.
Jim Wood, director of the University of Utah's Bureau of Economic and Business Research, said this year's building activity probably would have been even worse without the incentives.
"Instead of around 1,300 permits, we might have been down to 1,100 or 1,000," he said.
In normal times, incentives such as grants and tax credits are much more effective, Wood said. They help convince people to buy, which enables builders to construct even more homes.
But these are anything but "normal" times. Even though the incentives create more interest in buying, builders are having difficulty getting construction loans to build new homes, and consumers are having difficulty getting financing under tighter lending guidelines.
"With credit market conditions they way they are, it's going to
Still, the incentives are popular among prospective buyers. Veteran Salt Lake City Realtor Babs De Lay said she's been busy with first-time buyers this year who want the federal tax credit.
"That money is an absolute motivator."
Like others in the real estate industry, Mark P. Moyes, a loan officer with Veritas Funding in Salt Lake City, is worried because the 1,600 state grants of $6,000 are effectively all spoken for. And down the road, he is concerned about what will happen after Dec. 1, when the federal incentive no longer will be available.
Moyes believes the incentives have been important in getting people to buy who otherwise would have put it off out of fear of the recession and the specter of falling prices.
"It helped get people who were on the fence to buy," he said.
That's what happened with Clayton and Mindy Merrill of Logan. The couple had wanted a home for some time, but what made it a reality was -- an interest rate of 5 percent, the $8,000 federal income tax credit and that their lender, Bank of Utah, discovered $12,500 more in incentive money from other organizations that provide assistance to low- to moderate-income families.
"A 5 percent interest rate and $20,000 -- I just feel like we got the best deal in the world," Clayton Merrill said.
Check to see if you qualify for incentives:
Go to homesweethomeutah.org for a list of assistance programs available in Utah.
For information on the federal income tax credit of $8,000, go to irs.gov and type in "homebuyer tax credit."
The $6,000 grants available from the state are nearly all gone. Go to utahhousingcorp.org for more information.
After a busy home building year in 2006, builders have scaled back amid a particularly severe state and national downturn. Permits from January to June 9 in each of the past four years:
2009 » 1,280
2008 » 1,931
2007 » 5,575
2006 » 6,892
Source: Construction Monitor
