An Update on the Utah Economy

An Update on the Utah Economy

A report commissioned by the Salt Lake Board of Realtors reveals that since World War II there have only been two severe contractions in Salt Lake County’s real estate market.

If you are a baby boomer, you will remember the first contraction. It occurred from 1979-1982. Back then, the Salt Lake housing collapse was a result of overbuilding, high inflation (13%) and double digit mortgage interest rates (18%).

The second contraction is taking place now (2006-2010). In spite of an environment of low inflation and record-low mortgage interest rates, the demand for housing has remained weak. The primary causes of today’s lackluster housing market are vanishing demand, unemployment and underwater mortgages (negative equity).

In fact, in Salt Lake City there were more than 45,000 residential properties (20%) in negative equity in the third quarter, according to CoreLogic. This prevents homeowners little chance of moving up, a common feature of the real estate market.

What is needed more for a solid housing recovery? According to the Salt Lake Board’s report, an expanding job market is essential for a recovery. Good news about jobs will reduce uncertainty for homebuyers and sellers, help boost in-migration and provide the means for some of those doubled-up households to reenter the housing market.

Thankfully, Utah has turned the corner and is one again creating jobs. Further, according to Utah’s Revenue Assumption Committee, all of Utah’s major economic indicators will turn positive by 2011 with the exception of commercial building permits.

Specifically, the committee projects a much brighter future in 2011. Utah’s unemployment rate will fall to nearly 7%. The average annual wage is projected to rise 2.3%. Utah’s population will increase 1.7%. New auto and truck sales will skyrocket at 14.1%. New building permits for residential homes are expected to increase 18.3%, the first time residential construction will register a gain since 2005. And Utah exports will grow to $13.5 billion up 7.5%.

The Great Recession will be remembered for its long duration and economic devastation. Yet, it appears the gloom is near an end. Even foreclosures, which in Utah peaked in the first quarter, have begun a slow decent.

As one great man once said, “Night never had the last word. The dawn is always invincible.” So it is with this downturn. Let the recovery begin.

--Bryan Kohler, CEO of the Salt Lake Board of Realtors

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