UAR Broker Forum & Economic Summit

Yesterday I attended the broker forum and "town hall" (?) economic summit hosted by the Utah Association of Realtors. It was more focused on the housing market but plenty of valuable information. Here are a few key points that have direct or indirect impact on commercial real estate in Utah.

Howard Headlee, Utah Bankers Association

• waves of res. mortgage defaults likely still to come
• TARP bailout money just starting to hit the market, banks needs to raise deposits so they can lever the bailout money and start lending it (note: he didn't say anything about whether they banks will actually lend the money or just use it for acquisitions. I wanted to ask but there was no time for questions in spite of the "town hall" aspect of the event.)
• res. development - very limited lending until inventories decline and stabilize
• comm. development - depends on specific circumstances

Bill Erickson, Utah Housing Corp

• approximately 4000 new homes in Utah are sitting empty (that's 10.5 months worth of supply rather than our typical 6 months supply)

Ken Fears, NAR Regional Economics Mgr

• numbers of home sales and affordability indexs are getting close to pre-boom levels
• credit still thawing, noted spread between 3-month T-bill and LIBOR
• buyers have/will pay a premium for homes in "walkable neigbhorhoods" with amenities and access to mass transit

Kelly Matthews, Wells Fargo VP & Economist

• Utah still showing healthy population increases between births and net in-migration
• population increase is actually quite a bit higher than the number of housing starts (was 20k in 2006 and about 6k in 2008)
• previously forecasted housing values would have to drop 20% to return to "affordable levels", values have dropped about 8-9% from the highs and, because interest rates have come down, we may already be at that "affordable" level

Arthur "Chris" Nelson, U of U Dir. of Metropolitan Research

• the U.S. is the only industrial nation with population growth
• to maintain growth we will need to redevelop as much space as build new
• he forecasts that Utah will clear out extra housing inventory in 2009 and 2010 should be a good year
• condos & co-ops - nationwide resale and appreciation better than SFR
• 1/3 to 1/2 of new buyers coming into the market was "walkable neighborhoods" with transit options
• studied Phoenix and D.C. markets - found that during boom times the fringe (suburbs/exurbs) area appreciated and sold as well as areas closer to downtown, now with down cycle in market the fringe areas have been getting hammered while closer-to-downtown areas are holding values very well and, in some cases, still increasing
• anticipates home-ownership rates will fall for many years with underlying shift towards rental housing, even among mid/high income demographics
• to meet growing need for rental housing, 1/2 of new construction by 2020 may need to be for-rent
• dying mall area great redevelopment opportunities (see my most recent post about this)

James Wood, U of U Economic & Business Research

• over last several decades, Utah has had a period of expansion (3-5 years long) every 10 years followed by contraction (2-4 years long)
• current contraction has been quicker and more severe than any since 1950's
• contractions usually worst in the 3rd year, we're in middle of 3rd year right now
  
• 2010 will likely have 10k fewer jobs than 2007

A lot of hot air was also expended but I came away from the meeting with lots of good insights. General consensus was that the first half of 2009 will likely be pretty painful but things look much better beyond that for Utah's economy and housing market. Our fundamentals are pretty strong and it shouldn't take too much longer for the excess fat to get flushed out of the system.

I would be glad to hear from someone with additional insights or more information. Thanks.