ECONOMIC SUMMIT

2010

Residential Real Estate in Washington County

A Review & Preview

Presented by Vardell H Curtis, RCEChief Executive OfficerWashington County Board of REALTORS®

Nowhere to go but UP?

It was – note the past tense – the worst housing recession anyone but survivors of the Great Depression can remember.

From the frenzied peak of the real estate boom in 2005-2006 to the recession’s trough earlier this year, home resales fell 38% and sales of new homes tumbled 76%. Construction of homes and apartments skidded 79%. And for the first time in more than four decades of record keeping, home prices posted consecutive annual declines.

A staggering $4 trillion in home equity was wiped out, and millions of Americans lost their homes through foreclosure.

Now take a deep breath and exhale. The worst is over.

USA TODAY.comDecember 2009

Consumer Psychology

“There’s no denying that psychology plays a role in the states economic health. There was a very negative psychology that led to consumers clamping up last year and into this year. Consumer psychology contributed to our weak economy.”

Mark Knold – December 2009 Department of Workforce

Services

Confidence Bouncing Back

“Consumer demand has been lackluster and consumers make up about 70 percent of the economy. The national economic narrative has been so negative, but the national numbers don’t reflect what is going on in our state. We have our challenges, but the news that applies to most of the country doesn’t necessarily apply here, although consumers and business owners hear that news and sometimes start to react to the staggering numbers that apply to California but not Utah. Businesses have persevered and that courage and determination has gone a long way to keeping our local economy ahead of the rest of the nation.”

Lane Beattie, CEO – December 2009Salt Lake Chamber of Commerce

NOT Bulletproof

It’s been approximately two years since the recession gripped the nation, halting economic growth across the globe. Though Utah’s economy didn’t feel the recession as quickly as much of the nation did, the Beehive State proved economically vulnerable as housing prices fell, lending practices tightened, consumer spending dropped and unemployment rates rose.

Utah Business Magazine

December 2009

The Sixty-Four Dollar Question

Whether the owner of a mom and pop store or CEO of a major corporation, the question everyone wants an answer to is: When will the economy fully recover? Though there’s no concrete answer to this looming question, there are economic signs to watch out for. While many of those signs are pointing to a long recovery, the good news is Utah is positioned in the right economic direction.

Utah Business Magazine

December 2009

What About Our Market?

While local economists disagree on timing and extent of recovery, it appears to be close. Most agree the “price fear factor” among consumers will largely disappear in 2010.

A price stabilization will be dependent on local factors as well as the type of home. A bifurcated recovery is already taking place with prices on lower-end homes increasing and higher-end homes continuing to see declines.

Utah REALTOR Magazine December 2009

Washington County FACTS

Washington County entered the current economic downturn earlier than the state and the nation. And, it may climb out of the recession in advance of both the state and the nation too. Employment numbers for the second quarter of 2009 seem to confirm that Washington County’s employment contraction hit bottom in February 2009. While both construction permitting and sales are still showing year-over losses, these declines are shrinking – again suggesting the economy has bottomed-out and is setting the stage for growth in coming months. While the unemployment rate continued to edge up, the rise paled in comparison to the increases of late 2008.

Department of Workforce ServicesDecember 2009

The New ABNORMAL

Most economists say it could take at least until 2015 for the unemployment rate to drop down to a historically more normal 5.5 percent. And with the job market likely to stay weak, some also foresee another decade of wage stagnation.

Even though the economy will likely keep growing, the pace is expected to be plodding. That will make employers reluctant to hire. Further contributing to high unemployment is the likelihood of more people competing for jobs, baby boomers delaying retirement and interest rates edging higher. “It will be the mother of all jobless recoveries.”

Some analysts think the jobless rate might have already peaked at 10.2 percent in October (’09). But most economists predict the rate will peak at around 10.5 percent by the middle of 2010.

Associated Press December 2009

Unemployment WoesIn November of 2009, Utah reached a 6.5 percent unemployment rate. Though much lower than the unemployment rate gripping the nation – the U.S. unemployment rate is now 10 percent – the state’s unemployment rate is nothing to boast about.

While no industry has been unaffected by the slowdown, nearly 75 percent of Utah’s job loses are concentrated in construction, manufacturing, and professional and business services.

“Utah’s Economy” Commerce CRG

Unemployment Rates

Washington County Unemployment

Historical Perspective

Residential Construction

Building Permit Values

Notices of Default by Month

Default Notice Trends

NOD’s & Trustee Deeds

Inventory – Active / Sold / New

Inventory – Active / Sold / New

Absorption Rates

Absorption Rate Trends

Price Reduction Trends

Price Reduction Trends

2010: The Year of Growth

The key to recovery in 2009 was the lower end of the existing-home market. Fueled by the huge number of distressed sales – which drove down prices nationally by an average of 13 percent for the year – buyers returned to the market looking for bargains. Also helping were continuing low interest rates (5.2 percent on average for 2009), the first-time home buyer tax credit, and the rebounding stock market.

As a result, lenders in mid-2009 began cautiously lending money beyond the safe Fannie Mae, Freddie Mac, and FHA loans on which they relied for income during the credit crunch.

REALTOR Magazine Online December 2009

Government Programs

While consumer confidence has played a significant part in the economic recovery, so have the government programs that went into place at both the state and national level. The federal government enacted an $8,000 tax credit for first-time homebuyers. In Utah, the legislature used $10 million of the one-time federal stimulus dollars to create the Home Run program, providing $6,000 cash payments at closing for home buyers who would buy unsold new homes which were glutting the market and driving down prices.

Utah Business Magazine

September 2009

Home Buyer Tax Credit

As part of it’s plan to stimulate the U.S. housing market , Congress passed legislation that grants a tax credit of up to $8,000 to first-time home buyers.

In all, 4.4 million Americans look to take advantage of the home buyer tax credit before it expires by the middle of next year. From the enactment in February 2009 through October, NAR estimates 1.8 million households would have qualified to claim the first-time home buyer tax credit. Now with the tax credit deadline extended till the end of June 2010 (for closings, with contracts signed by the end of April, 2010) and also available to many move-up buyers, an additional 2.6 million families would likely claim the home buyer tax credit.

REALTOR.org December 2009

Financing in Today’s Market

The days of “liar” loans, the no document, stated income, nothing down deals of the freewheeling early years of the 2000’s came to a sudden end as banks like Lehman Brothers and Bear Stearns collapsed under the weight of all the bad loans they made.

Finding a loan like those that fueled the housing boom and inflated the real estate bubble is now impossible. Today, buyers need to bring cash to the closing table, and have a credit score well into the 700’s.

Utah Business Magazine

September 2009

The Wild Wild West

For years Las Vegas symbolized the boom, as mile after mile of desert gave way to three-bedroom homes and swimming pools. Then came the crash and it symbolized something else: a decade of speculation and excess. Now, Las Vegas is one of the hottest housing markets in the region again. This city has always profited from others’ misfortune, and the same can be said of the current housing market. In Clark County, Nevada, one in every 11 homes had received at least one foreclosure-related notice in June (‘09). The glut of deeply discounted foreclosures has almost doubled sales activity for most of this year. It’s not uncommon to see multiple offers on a single property, and that’s helped slow the rate of price declines a little. The demand also has helped whittle down the inventory of homes for sale to the lowest level since the boom.

USATODAY.com

December 2009

Where are Housing Sales Headed?

There seems to be some consensus among economists that housing sales have reached a bottom. Economist James Wood, director of the University of Utah’s Bureau of Housing and Economic Development, believes home sales have already reached their low point, bottoming out in the first quarter of 2009.

Mark Zandi, chief economist and co-founder of Moody’s Economy.com, expects sales to improve over the next two years but not reach their normal trend levels until 2012.

Utah REALTOR Magazine

December 2009

What’s Up With Prices?

Although prices have shown some signs of stabilization nationally (the Case-Shiller 20-city index has been rising for five consecutive months), the bottom for prices might not come until mid-2010.

There could be declines through next spring and summer because the Obama administration’s loan modification plan delayed a number of foreclosures that are likely to hit the market next spring, causing prices to drop again.

The bottom in the house prices is going to be very closely tied to when the share of distressed home sales begins to decline.

Utah REALTOR Magazine December 2009

Home Values

More Affordable Homes

Average Sold Price 2000-2009

The Long Road to Recovery

Washington County was one of the hottest markets during the national housing boom and has since witnessed one of the sharpest corrections.

The real estate market in Southern Utah has undergone tremendous change, but is now set for a slow trek upward. This change is significant as it defines the bottom for the market, allowing buyers to focus on the facts and not the “what ifs”. In short, the local market may experience more bumps, but it is on the long road to recovery.

Home Sales Growth

The sharp price contraction beginning in 2007 and continuing on into 2009 has been a double-edged sword; heartache for homeowners, but an opportunity for buyers. With foreclosures from the subprime mess being replaced by foreclosures resulting from job losses, a continuation of home sales growth is critical to turning the market around.

Moving Forward

There’s no quick fix to today’s troubled economy. Economists agree that full economic recovery is going to be a slow and long process. But that doesn’t mean that we’re not headed in the right direction.

Utah was ranked No. 1 in the nation for it’s overall economic outlook by the ALEC-Laffer State Economic Competitiveness Index. The Pew Center on the States also named Utah the best managed state in the nation.

Utah Business Magazine December 2009

Recovery Factors to Consider

Baby Boomers continue to march toward retirement and Southern Utah remains a hot retirement destination. Investors are finding opportunities in a market where home prices are below market rents in some neighborhoods.Many would-be buyers were either priced out of the market during the boom or were simply scared out by the upward spiral of prices. Now these buyers are returning and many current renters will make the switch and begin to build equity as homeowners.

Safest Places to Live

Being in a safe community is one of the most important factors that buyers consider when purchasing a home, condo or any other type of real estate. So where are America’s most secure places to live?

St.George, Utah topped all small cities with populations of 150,000 or fewer. The city has 110,515 residents who enjoy a mild climate, clean air and low annual precipitation. It also has the lowest crime rates of all the 379 communities surveyed. St.George stands first in employment among the 138 small towns in the Farmers Insurance Group of Companies study.

City Spur December 2009

Top Ten

1. St.George, Utah

2. Bend, Oregon

3. Blacksburg, Virginia

4. Coeur d’Alene, Idaho

5. Ithaca, New York

6. Morgantown, West Virginia

7. Logan, Utah

8. Winchester, Virginia

9. Harrisonburg, Virginia

10.Idaho Falls, Idaho

The Well-Being of 50 U.S. States

A survey called the Gallup-Healthways Well-Being Index reveals which states are happiest. The index includes questions about six types of well-being, including overall evaluation of their lives, emotional health, physical health, healthy behaviors, and job satisfaction.

1. Utah 69.2 6. Maryland 67.1 46. Arkansas 62.92. Hawaii 68.2 7. Washington 67.1 47. Ohio 62.83. Wyoming 68.0 8. Massachusetts 67.0 48. Mississippi 61.94. Colorado 67.3 9. California 67.0 49. Kentucky 61.4 5. Minnesota 67.3 10. Arizona 66.8 50. West Virginia 61.2

LiveScience.comDecember

2009

Average Sold Price 2008-2009

Average Sold Price 2008-2009

Days On Market & Sold Price

Days On Market & Sold Price

Days On Market & Units Sold

Days On Market & Units Sold

Grateful AcknowledgementsUSA Today.com

Utah Department of Workforce ServicesSalt Lake Chamber of Commerce

Utah Business MagazineUtah REALTOR ® Magazine

Associated PressCommerce CRG

U.S. Bureau of Labor StatisticsSouthern Utah Title Developer Services

Utah Bureau of Business and Economic ResearchWashington County Board of REALTORS®

REALTOR® Magazine OnlineREALTOR®.org

Office of Federal Housing Enterprise OversightNational Association of Homebuilders

City SpurLiveScience.comSGI Mortgage

Population Change