09 May 2009

Economists See Utah Housing Recovery Taking Shape-

Presidents Message:
Chris Sloan:

Each week in my capacity as President of the Utah Association of Realtors I publish an Article in the Salt Lake Tribune about Utah Real Estate, the housing market in Utah, or sometimes even "tips on buying a home in Utah". I usually share it with you on my blog. This weeks article will give you a glimpse into the heads of a few national economists and expose you to some of the folks that make a living forecasting what will happen and analising what is happening now and what that means to all of us interested in Utah Real Estate. 

This week it's  GOOD NEWS ! 

Over the past month, several indicators have signaled the nation’s economy may begin to turn around in the second part of the year.

 Just this week, reports showed a surge in U.S. consumer confidence, a reduction in new home inventory and a flattening of new home sales.

That’s why it was no surprise when economists who spoke at the National Association of Home Builders’ Construction Forecast Conference said there are reasons to be optimistic about the U.S. economy and the housing market. The conference, which takes place every six months, featured presentations from some of the most prominent economists in the U.S., including representatives from Fannie Mae and Freddie Mac, the FDIC and Moody’s Economy.com.

The underlying theme of the conference was that there are reasons for optimism, although those reasons varied from economist to economist. Some of the reasons most often cited were the low mortgage interest rates, the federal stimulus, Federal Reserve actions, pent-up demand for housing, a reduction in inventory and an overall improvement in housing affordability. “I think we’re going to pull out of this thing in the second part of the year,” said Maury Harris, chief U.S. economist and managing director of UBS, who cautioned that the recovery would be a gradual one with GDP growth in the 2 percent range for the second half of 2009 and in 2010.

In terms of national housing sales, Mark Zandi, chief economist of Moody’s Economy.com, said we have already hit the bottom, which he believes was in the first quarter of this year. Sales of new single-family homes are also expected to have hit their low point in the first quarter, said David Crow, chief economist of the National Association of Home Builders.

Although it’s too soon to tell when the bottom will be for Utah home sales, in particular, anecdotal reports seem to suggest Utah sales may be near the low point as well. Over the past few weeks, Realtors throughout Utah have reported they are seeing the most activity they’ve seen in more than a year.

Zandi’s forecast for a bottom in U.S. home prices will take a little more time, stabilizing in December and remaining flat in 2010, he said. Harris similarly stated that he expected to see a bottom in home prices at the end of the year.

The return to affordability, however, will inevitably prop up the market. “The inflated conditions of the housing market are really behind us,” said Jim Glassman of JP Morgan. “Prices, relative to affordability, are [now] kind of where they’ve always been.” Glassman said that will bring buyers back into the market because as prices become affordable, people want to own, especially because of the government ownership incentives like the mortgage interest and property tax deductions.

 It could, however, take longer for the jobs market to rebound. Zandi is forecasting the unemployment rate won’t peak until about a year from now, and there are signs that the U.S. will continue to lose jobs until early 2010, although the losses will be at a slower pace, said Crow. Because rising unemployment is a negative factor for home sales, Harris explains how home sales can begin rising if people are losing their jobs. “Housing is a leading indicator. It leads you into recessions; it leads you out of recessions,” he said. “And the home sales always turn up before unemployment peaks” because of other factors like lower interest rates.

Harris also pointed out that only a small percentage of the population has to enter the housing market in order to see gains. In fact, that improvement is already starting to happen. “What you’re seeing play out in the market is a belief that we are in the middle of a transition,” Glassman said. “We’re sliding from a very steep decline to stability, and I think by fall that we’ll be pretty confident that we’re on the road … and this will be behind us pretty soon.”

I hope you have enjoyed todays article and have gained a modest understanding of the many factors that will help make up the Utah Housing Recovery.

If you have any questions about Real Estate in Utah, give us a call @ 435-840-5029.

To catch up on past articles about Utah Real Estate check out our blog, @ Utah Stuff.

See you next week.

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