Toughest times for Utah housing may be nearing end

Toughest times for Utah housing may be nearing end
Economy » Bubble collapse cost $20 billion in residential real estate wealth.

By Steven Oberbeck, The Salt Lake Tribune
Updated:07/10/2009 10:54:06 PM MDT

These are tough times for Utah's home building industry, but better times may lie ahead.

The collapse of the state's housing bubble in 2008 wiped out at least $20 billion in residential real estate wealth, eliminated thousands of construction jobs and forced hundreds of homebuilders out of business, according to James Wood, director of the University of Utah's Bureau of Economic and Business Research.

Yet Wood, in a new research report titled "Utah's Homebuilding Industry: Present Perspective, Future Prospects," suggests the rate of the home building industry's decline has been slowing of late.

"The diminished weakness in recent months allows for some hope that the bottom of the housing cycle in Utah is near," said Wood, noting the industry nevertheless still faces enormous headwinds.

Curt Dowdle, chief executive of the Salt Lake Homebuilders Association, said the industry may have hit bottom in Utah already or is near it.

"We had two strong incentive programs, one federal and the other the Utah Home Run Grant that gave new home buyers $6,000 in down payment assistance to help them purchase never before lived in homes," he said.

Those programs -- that resulted in 1,600 Utahns receiving state grants -- helped reduce inventories of unsold homes in Utah, Dowdle said. "What is happening, though, is that builders who want to construct new homes are being stonewalled by lenders and can't get the financing they need," he said.

"We may be near the bottom but the question is whether the recovery will be V-shaped our U-shaped and how long it is going to take," Dowdle said.

Wood's study reported the year-over percent change in building permits issued in Utah was actually positive in December, January and February -- before turning negative and declining 16 percent in March, 18 percent in April.

Over the same period, new building permits issued nationally were down more than 40 percent, Wood reported.

"In this housing cycle only 15 states have had steeper declines than Utah," Wood said. "Residential construction peaked in 2005 when 28,500 building permits were issued for new dwelling units. By 2008 the number of permits had dropped by 61.2 percent to 10,912 units."

Declining construction activity, represented by those falling permit numbers, translated inevitably into lost jobs.

In 2007, there were 103,500 workers in Utah's construction industry. One year later, the number had declined to 90,500 employees, a 12.5 percent loss, Wood said.

The Utah Department of Workforce Services projects the construction industry's share of total nonagricultural employment in the state eventually will revert to the historic average of 5.8 percent.

"We're not there yet, but we're getting close," said Mark Knold, chief economist for the department. "And that is not necessarily a bad thing, since you can make the argument we were probably building [at a pace] over and beyond what was really necessary."

steve@sltrib.com