September 2008
Utah's situation is positive compared to national statistics, and it is downright glowing when compared to our neighbors to the south and west (you know who you are — Phoenix, Las Vegas and Southern California).
"We've been affected here (in Utah). We're not immune," says Kelly K. Matthews, Wells Fargo's executive vice president and chief economist. "But arguably, Utah's housing situation is perhaps better than the national average and far better than (neighboring regions)."
In fact, Utah's economy is among the most robust in the country. According to information supplied by the Governor's Office of Planning and Budget, the Utah unemployment rate is estimated to be only 3.7 percent for 2008 — well under the national estimate of 5.2 percent for the same time frame.
In the summer 2008 edition of Zions Bank's InSight publication, Jeff Thredgold, Zions Bank economic consultant, states the Utah economy added roughly 25,000 net new jobs (an increase of 2 percent) in the last 12 months, which ranks second behind only Wyoming for percentage growth of that period. While that number is much lower than the estimated job growth rate from 2005 to 2007 (when Utah added approximately 49,000 new jobs annually), it is a steady growth in a time of economic slowing in other areas.
Some good news …
With a high number of homes for sale, prices will naturally lower. This, according to Matthews, is the key. After all, a correction only needs to happen until the problem is fixed. "I don't believe, when it comes to supply and demand, that we're overbuilt or that the interest rates are too high," Matthews says. "It's a matter of affordability."
Matthews believes prices need to adjust some to reach a sustainable level of affordability.
In the first quarter of 2008, only 61.2 percent of homes sold in Ogden-Clearfield were considered affordable to those earning the area's median income — the highest affordability measurement of any metropolitan area in the state, according to the Housing Opportunity Index (HOI) research released in a report by the National
Association of Home Builders. Salt Lake City (46.5 percent) and Provo-Orem (44.4 percent) were less affordable. St. George only had an affordability percentage of 31.5 percent — the lowest of all major metro areas in the state.
But the fact that prices are adjusting is good news for REALTORS®. With a strong economy bringing new jobs, buyers are coming. And many would-be buyers are seeing things get closer to "bottoming out" — something many are waiting for.
"In our economic environment, no one wants to lower prices faster than they have to," Matthews says. "But we are seeing property owners slowly moving prices down.
That will bring in buyers and stabilize the market."
The good news? Matthews estimates that at current price reduction rates, stability will be reached by the fourth quarter of 2008.
While only time will tell what will happen with house prices and affordability, there is no question that as affordability goes up, buyers become more abundant.
