Builders slam on brakes
Permits for new homes along the Wasatch Front hit a 14-year low
By Lesley Mitchell
The Salt Lake Tribune
Article Last Updated: 01/17/2008 11:52:23 PM MST
It started out on a good note, but 2007 ended up as one of the worst years ever for home building along the
Wasatch Front.
Builders took out permits for the construction of 9,877 single-family homes along the Wasatch Front last year, the
lowest level since 1993, according to Construction Monitor, which tracks building activity throughout the West.
And the nearly 36 percent drop in permitting activity from 2006-2007 is one of the Wasatch Front's worst yearly
drops ever - it tops any percentage loss since 1990, when the service began tracking permitting activity in the state.
The drop is especially steep when the state's population is taken into account. In 1990, the state's count was 1.7
million people; today the total is estimated at nearly 2.7 million.
Nationally, the Commerce Department reported Thursday that construction began on 1.35 million new homes and
apartments last year, down 24.8 percent from 2006. Unlike Utah, where the slowdown began in earnest just eight
months ago, many other housing markets already have been in a downturn for a year or more.
The national drop, the largest in 27 years, was also the second biggest annual decline ever. The largest decline
was a 26 percent drop in 1980, when high interest rates across the country made it difficult for many to buy homes.
''I think this housing downturn will be unprecedented
in terms of its breadth across the country and in its severity,'' said Mark Zandi, chief economist at Moody's
Economy.com. ''I don't think we have seen anything like this, certainly since the Great Depression, and back then
housing was much less of a factor in terms of the overall economy because fewer people owned their own homes.''
One major culprit for the bad home-building year are the tighter lending standards put in place last year after the
nation's subprime lending debacle, in which substantial numbers of borrowers with poor credit got home loans that
ultimately ended up in foreclosure. Another culprit is the cumulative effect of years of house-price increases that
have put homeownership out of reach of more families, including those in Utah.
"It's really affected the [demand for the] $350,000 to $800,000 price range," said Jordan Bangerter, president of
the Salt Lake Home Builders Association. "There just aren't that many people that can afford that type of house
payment now."
Bangerter said he doesn't believe that the Wasatch Front is as overbuilt as the Phoenix or Las Vegas metro areas,
which have been hit hard by the downturn and have seen their economies suffer as a result. And, he says, the
state's strong population growth should help absorb some of the excess inventory of new homes for sale that now
exists.
Still, he said, challenges for his industry in Utah loom.
"Our industry is trying to adjust to meet demand for less expensive housing," he said. That's a difficult challenge,
he said, given that the public - and cities - prefer bigger and bigger homes.
The residential downturn has yet to create a huge drag on Utah's economy as it has done in other states, said
Mark Knold, chief economist for the Utah Department of Workforce Services. But it is clearly helping slow job growth.
The state created 44,800 jobs in the year that ended in December, for an employment growth rate of 3.6 percent,
Workforce Services said. That's down from 3.9 percent in the year that ended in November and from 4.5 percent in
the year that ended in August.
Knold said about 2,200 people in construction industry in the state filed for unemployment benefits in December
2007 up from only 1,300 in December 2006.
"That's a pretty big jump in unemployment claims related to the construction industry," he said.
With home building in recent months plummeting to nearly two decade-lows, several home builders have laid off
administrative workers in recent months, and subcontractors that two years ago were busy pouring concrete,
framing, putting in electrical and plumbing systems and roofing have as well.
The good news is that construction job growth in Utah is up 7.4 percent in the year that ended in December,
because of a surge in commercial construction projects.
Knold said there has been, however, some spillover into other industries. A number of mortgage companies, for
example, have shed some workers in recent months.
"You have to think if we're not selling as many houses, we're not going to need as many mortgage people, title or
real estate people," Knold said.
---
* THE ASSOCIATED PRESS contributed to this report.
Permits for new homes along the Wasatch Front hit a 14-year low
By Lesley Mitchell
The Salt Lake Tribune
Article Last Updated: 01/17/2008 11:52:23 PM MST
It started out on a good note, but 2007 ended up as one of the worst years ever for home building along the
Wasatch Front.
Builders took out permits for the construction of 9,877 single-family homes along the Wasatch Front last year, the
lowest level since 1993, according to Construction Monitor, which tracks building activity throughout the West.
And the nearly 36 percent drop in permitting activity from 2006-2007 is one of the Wasatch Front's worst yearly
drops ever - it tops any percentage loss since 1990, when the service began tracking permitting activity in the state.
The drop is especially steep when the state's population is taken into account. In 1990, the state's count was 1.7
million people; today the total is estimated at nearly 2.7 million.
Nationally, the Commerce Department reported Thursday that construction began on 1.35 million new homes and
apartments last year, down 24.8 percent from 2006. Unlike Utah, where the slowdown began in earnest just eight
months ago, many other housing markets already have been in a downturn for a year or more.
The national drop, the largest in 27 years, was also the second biggest annual decline ever. The largest decline
was a 26 percent drop in 1980, when high interest rates across the country made it difficult for many to buy homes.
''I think this housing downturn will be unprecedented
in terms of its breadth across the country and in its severity,'' said Mark Zandi, chief economist at Moody's
Economy.com. ''I don't think we have seen anything like this, certainly since the Great Depression, and back then
housing was much less of a factor in terms of the overall economy because fewer people owned their own homes.''
One major culprit for the bad home-building year are the tighter lending standards put in place last year after the
nation's subprime lending debacle, in which substantial numbers of borrowers with poor credit got home loans that
ultimately ended up in foreclosure. Another culprit is the cumulative effect of years of house-price increases that
have put homeownership out of reach of more families, including those in Utah.
"It's really affected the [demand for the] $350,000 to $800,000 price range," said Jordan Bangerter, president of
the Salt Lake Home Builders Association. "There just aren't that many people that can afford that type of house
payment now."
Bangerter said he doesn't believe that the Wasatch Front is as overbuilt as the Phoenix or Las Vegas metro areas,
which have been hit hard by the downturn and have seen their economies suffer as a result. And, he says, the
state's strong population growth should help absorb some of the excess inventory of new homes for sale that now
exists.
Still, he said, challenges for his industry in Utah loom.
"Our industry is trying to adjust to meet demand for less expensive housing," he said. That's a difficult challenge,
he said, given that the public - and cities - prefer bigger and bigger homes.
The residential downturn has yet to create a huge drag on Utah's economy as it has done in other states, said
Mark Knold, chief economist for the Utah Department of Workforce Services. But it is clearly helping slow job growth.
The state created 44,800 jobs in the year that ended in December, for an employment growth rate of 3.6 percent,
Workforce Services said. That's down from 3.9 percent in the year that ended in November and from 4.5 percent in
the year that ended in August.
Knold said about 2,200 people in construction industry in the state filed for unemployment benefits in December
2007 up from only 1,300 in December 2006.
"That's a pretty big jump in unemployment claims related to the construction industry," he said.
With home building in recent months plummeting to nearly two decade-lows, several home builders have laid off
administrative workers in recent months, and subcontractors that two years ago were busy pouring concrete,
framing, putting in electrical and plumbing systems and roofing have as well.
The good news is that construction job growth in Utah is up 7.4 percent in the year that ended in December,
because of a surge in commercial construction projects.
Knold said there has been, however, some spillover into other industries. A number of mortgage companies, for
example, have shed some workers in recent months.
"You have to think if we're not selling as many houses, we're not going to need as many mortgage people, title or
real estate people," Knold said.
---
* THE ASSOCIATED PRESS contributed to this report.
| Kirk Millson Plumb & Co. |
| 801.419.8912 |
| kirk@sugarhouseutah.com |
| Sugar House Utah Economic News |
This is great news for owners of existing homes in Utah. The building frenzy has kept the housing
supply high, which has depressed prices. But now that builders are taking a break, all those
newcomers who are making Utah one of the fastest-growing states in the nation will put pressure on
the existing-home market. That means higher prices down the road. -- Kirk Millson
supply high, which has depressed prices. But now that builders are taking a break, all those
newcomers who are making Utah one of the fastest-growing states in the nation will put pressure on
the existing-home market. That means higher prices down the road. -- Kirk Millson
