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Economic Summit 2009

Economic Summit 2009. A Residential Real Estate Review & Preview for Washington County Presented By Art Partridge Alan Hamlin, Ph.D. Vardell Curtis, RCE Assessor Chair, Dept. of Mgmt. Chief Executive Officer

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Economic Summit 2009

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  1. Economic Summit 2009 A Residential Real Estate Review & Preview for Washington County Presented By Art Partridge Alan Hamlin, Ph.D. Vardell Curtis, RCE Assessor Chair, Dept. of Mgmt. Chief Executive Officer Washington County So. Utah University Board of REALTORS®

  2. JULY 26, 2004 Rising interest rates are prompting many homebuyers to opt for adjustable-rate mortgages over traditional fixed-rate loans, just as they did during the 1994 and 1999 market cycles, says Mortgage Bankers Association Chief economist Doug Duncan. However, there Are now concerns about the use of ARMs by low income, poor credit borrowers, who account for two-thirds of all originations. “Some of the products that are being originated today will turn into the foreclosures of tomorrow,” says HSH Associates Vice President Keith Gumbinger. A report due out today from the Consumer Federation of America calls the trend a “time bomb” in the making, noting that cash-strapped borrowers are using ARMs in a last-ditch effort to achieve homeownership. Financial Times – 7/26/2004

  3. The Cold Hard Truth Part of the problem right now is that we recognize that this mess we are in was caused by an inappropriate evaluation of risk. So it is important that we rebuild a solid foundation of lending to people who can pay back those loans. It does no one any good to give someone a loan that can’t pay it back. It’s not an impossible threshold. All banks are talking about right now is some modest amount of equity participation (a down payment), some reasonable FICO score (which indicates you’ve paid your loans in the past), and some income or job (which indicates that you can pay your loan in the future). Kelly Matthews – Wells Fargo Bank Salt Lake REALTOR Magazine – 12/08

  4. “Housing Needs to Improve” NEW YORK – Washington’s financial bailout plan is now law. So the credit spigot will start flowing again, banks will resume lending, and an economic recovery can begin, right? Wrong. Experts say the most important thing that needs to happen before the $700 billion bailout even has a chance of working; home prices must stop falling. That would send a signal to banks that the worst has passed and it’s safe to start doling out money again. The problem is the lending freeze has made getting a mortgage loan tough for everyone except those with sterling credit. That means it will take several months or longer to pare down the glut of houses that were built when times were good – and those that have come on the market because of soaring foreclosures – before homes start appreciating. Associated Press – 10/2008

  5. Gray Skies Ahead Anyway you view it, Utah’s economy will face some challenges during the first part of 2009. After losing 15,000 jobs during the past year, the state’s construction industry will still be hurting as a sluggish economy has delayed, or even halted, major development projects. And with acres of commercial real estate sitting vacant and dozens of development sites abandoned, contractors, developers and all those associated with the real estate market will have definite obstacles to overcome. Utah Business MagazineDecember 2008

  6. Light at the Tunnels End? There are reasons to be optimistic about Utah’s 2009 economic forecast. The state’s work ethic combined with the appealing cost of doing business, affordable cost of living, strong technology and business environments, an educated workforce and growing population contribute to the recovery. However, business owners, consumers and employees need to be patient as the national market works through the financial crisis. Utah is not immune to the effects of the global economy and residents will certainly feel the pressure. But by practicing old-fashioned values, the average home owner or business owner should survive the financial quandary. Utah Business Magazine December 2008

  7. The Cyclical Nature of Real Estate Two years ago the scenario was much different from today. New homes were being purchased in favor of existing homes. Likely, towards the end of year 2009 the tables will turn again and new homes will be springing up in all areas of the county on so many of those now well-priced lots which lay there gathering dust, weeds, and taxes. While it is important to note that it has been 20 years since our permitting levels were as low as they’ll be in year 2008, this temporary respite will pass, and the run-up will begin anew. Our local real estate market has never been more attractive if you are a buyer. Truly, the buyer with the resources and money has clout at a level not seen in a quarter century. MainStreet Business Journal – June 2008

  8. An Unprecedented Window of Opportunity For those whose homeownership aspirations have been dampened or temporarily derailed by the housing and economic downturn – the people wondering if this is a good time to buy – the answer is simple: YES. It’s a good time to buy. Today’s market, coupled with a temporary tax credit for first-time home buyers and near-record low mortgage interest rates, provides an unprecedented window of opportunity for prospective home buyers. In fact, there may never be another buyer’s market as good as today’s. National Association of Home Builders

  9. ACCRA Cost of Living Index MetroCompositeHousingUtilitiesHealth CareGrocery Cedar City (micro) 92.6 88.7 78.7 89.0 100.0 Logan 94.9 76.5 82.3 100.2 108.1 St.George 96.5 103.3 69.5 89.6 100.0 Salt Lake City 100.9 101.9 72.2 100.8 104.5 Las Vegas 106.9 126.7 86.7 107.7 100.9 Flagstaff 118.4 162.7 91.0 100.5 107.2 Phoenix /Scottsdale 101.1 100.2 86.0 98.4 103.4 Tucson 98.9 95.8 88.1 98.3 108.7 New York / Manhattan 224.2 413.2 171.2 135.2 144.6

  10. House Price Appreciation (Sept. 30, 2008) MSANational Ranking1-YearQuarter5-Year Logan, Utah 8 4.55 1.11 34.25 Salt Lake City, Utah 157 -1.76 -1.74 52.86 St.George, Utah 235 -8.47 -4.73 59.47 Las Vegas, Nevada 283 -26.78 -12.63 25.82 Merced, California 292 -42.30 -16.51 -15.00 Austin, Texas 1 5.62 1.69 35.32 United States -4.00 -2.68 28.78 Utah 29 -1.64 -1.93 47.70

  11. What About The ‘What Ifs’? Given the ongoing turmoil in the housing and financial markets, many people who want to buy homes are sitting on the fence, either waiting for the market to bottom out or fearing that it never will. So what is the chance that the market will continue to decline, prices will continue to drop and a home purchased today will be worth less a year from now? Of course, no one can know for sure what will happen a month, six months or a year from now. Housing is predictably cyclical, but the current housing slump has already lasted longer than previous downturns. Moreover, timing the market is a strategy that rarely works; by the time it’s clear that a market has turned around, it’s too late to take the best advantage of the conditions at the bottom. National Association of Home Builders

  12. Opportunities in 2009 • INVENTORY Selection at it’s best in all areas/prices • INTEREST RATES remain at HISTORICAL Lows • PRICE and VALUE are extremely favorable • Home SELLERS are MOTIVATED • PROFESSIONAL SERVICE Levels have improved (Title, Mortgage, Appraisal, Home Inspection,…) • Great FINANCING Options FHA 3.5% down (gift letters) 1st Time Home Buyer Assistance Programs • Advances in TECHNOLOGY/COMMUNICATION

  13. Economic Recovery! How Much Longer? We should plan on 2009 being a pretty difficult year for the full year. It’s possible at sometime in the second half of the year that the stock market could begin to improve. But in terms of the underlying economy it is going to take at least a year before we see some type of improvement. I don’t think unemployment rates will start coming down until 2010. I would like to hope that we make serious progress in the housing area in 2009. That will take getting more homes sold and reducing foreclosures. There’s probably just no way to get this problem solved without somebody or some segment somewhere eating some of the loss in terms of reducing the principal. There’s got to be some reduction in principal to stabilize the situation. Kelly Matthews – Wells Fargo Bank Salt Lake REALTOR Magazine – 12/08

  14. Summary & Conclusion Short sales and foreclosures continue to drive down existing home prices and put increased pressure on builders to supply low-cost new homes to compete with the reduced-priced existing homes. Lot sales and building permits continue to be slow allowing the market to absorb the more than ample supply of already built but not moved into new homes. Banks and mortgage companies are still lending, the rates are still favorable, and those willing to navigate the effects of the foreclosure market on underwriter requirements are able to take advantage of bargain basement prices. The Washington County real estate market has been sustained for decades by selling attractive, affordable and quality homes in a premier, fun part of the country with deep moral values and a tremendous sense of community.

  15. How’s Your Attitude? “It’s a scary time right now,” says Jeff Thredgold, Zion’s Bank economic consultant. “But we have to make the assumption we’re going to get through this. What makes the market work is confidence.” Utah Business Magazine December 2008

  16. Some Good News For A Changeby FRED THOMPSON http://www.silverbearcafe .com:80/private/12.08/ goodnewa.html

  17. FED ON TARGETA bullish view on the Federal Reserve, with MAD MONEY Host JIM CRAMER http://www.cnbc.com:80/id/15840232?video=967866479

  18. Acknowledgements Southern Utah Title Developer Services Associated Press The Council for Community and Economic Research CNBC.com Salt Lake REALTOR® Magazine MainStreet Journal National Home Builders Association Financial Times Office of Federal Housing Enterprise Oversight Silver Bear Café Utah Business Magazine Washington County Board of REALTORS®

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