Wednesday, January 28, 2009

Home sales fall in 4Q08

Number of homes sold falls

By Jasen Lee

Deseret News
Published: January 28, 2009

The volume of existing home sales in northern Utah took a serious nose dive in the final three months of last year, according to a report released Tuesday.

Data from the Salt Lake Board of Realtors showed that sales in Tooele County dropped 40.5 percent in the fourth quarter of 2008 compared with the same period the previous year. Weber County sales fell 21.8 percent year over year, Salt Lake County sales declined 21.1 percent and Davis County sales decreased 18.2 percent over the period.

Only Utah County bucked the trend along the Wasatch Front, as existing home sales rose slightly — up 1.6 percent — during the fourth quarter of 2008 compared to the fourth quarter in 2007.

While sales volume fell significantly during the period, the median sales prices of homes in the five counties were relatively stable. The report stated that the median sales price in Salt Lake County declined 0.17 percent for the year over year period to $239,500. That was followed by Weber County at $167,000 — a decrease of 0.54 percent. Tooele County was down 1.1 percent to $188,000, while Utah County decreased 2.5 percent to $230,000 and Davis County's median sales price fell 3.6 percent to $216,900.

"This report shows that prices are going down, but not as dramatically as in other areas of the country," said Kendall Oliphant, senior vice president of Thredgold Economic Associates.

He warned that Utah has avoided some of the steep price declines that neighboring Western states have experienced, though 2009 could be rough.

"A bottom is coming," Oliphant said. He said that low point would probably come in the later part of this year.

"There are concerns about the economy out there," he said. "People are worried that there will be income to support a mortgage payment."

Oliphant said that besides falling prices, Utah would likely continue to see slower sales volume in 2009.

For 2008, sales volume was down at least 20 percent in each of the five counties compared with the previous year, and 34.1 percent for Tooele County. Despite the decline in home sales, Weber County was the only one of the five to experience an increase in median sales price for the year, improving 2.9 percent compared with 2007. All other counties saw slight decreases.

The report, which tracks quarterly single-family home and condominium sales in the five-county region, indicated that 64 of 81 ZIP codes surveyed experienced decreases in median sales prices.

Several ZIP codes saw double-digit declines in their median sales prices. Those ZIP codes included Utah County's 84043 in Lehi, where the sales prices fell 19.9 percent to $237,000. The Davis County ZIP code of 84010 in Bountiful saw a 16.7 percent decrease in prices to $238,500, as did Salt Lake County's 84092 in Sandy, where prices were down 16.3 percent to $340,000.

But some ZIP codes saw positive growth in median sales prices. In Utah County, the median sales price in the American Fork ZIP code of 84003 jumped almost 25 percent to $340,000. The Riverdale ZIP code of 84405 in Weber County saw an increase of 14.2 percent to $185,500. And the median sales price in the Salt Lake County ZIP code of 84124 in Holladay rose 12.8 percent to $397,500 — although sales volume fell 29.4 percent during the quarter.

Condominium sales dropped in all five counties surveyed, the report said. Sales in Salt Lake County were down nearly a third compared with the fourth quarter of 2007.

However, the median sales prices increased in three counties, with Tooele County experiencing a modest increase of 3.3 percent, and Utah County seeing a 2.4 percent rise. Davis County's median condominium sales price increased 15.7 percent.

In other Western states, deep discounts on foreclosed homes helped power sales of pre-owned homes in December, with metro areas in California, Nevada and Arizona leading the way, according to two reports released Monday.

In all, about 90,000 existing homes and condos were sold in December in the 13-state region. Without adjusting for seasonal factors, sales were up 36.4 percent from the same month in 2007, according to the National Association of Realtors.

Since last summer, distressed home sales have made up an increasing slice of pre-owned home sales across once high-flying markets in California, Nevada and Arizona. That trend continued in December, helping to bring down the median home price across the West by 31.5 percent from the previous year to $213,100, the association said.

Nationally, existing home sales rose about 1 percent from December 2007, while the U.S. median home price slid 15.3 percent to $175,400.

Contributing: The Associated Press

Tuesday, January 27, 2009

Tribune article on 2008 home sales

Tough year yields fewer home sales, but only slightly lower prices
Downturn
» Economists worry values will drop even more in '09

By Lesley Mitchell
The Salt Lake Tribune
Updated: 01/27/2009 05:21:37 PM MST

A total of 8,743 single-family homes changed hands in Salt Lake County last year, down more than 25 percent from 2007, a report released by the Salt Lake Board of Realtors shows.

Median selling prices in Utah's most populous county were off only 1.3 percent, to $244,831, but most economists predict larger drops in selling prices are coming this year as Utah's economy continues to deteriorate. The Realtor's report covers mostly existing homes.

"2008 was obviously a tough year," said Ryan Kirkham, president of the Salt Lake Board of Realtors.

Though Kirkham and others are optimistic about this year, economists say there are no strong signs pointing to a brighter 2009 -- even with historically low mortgage rates.

Home sales all along the Wasatch Front have been affected.

Sales in Davis County were off nearly 21 percent from 2007 to 2008, according to the report, while prices were off 2.2 percent, to $221,000. Sales were off nearly 20 percent in Utah County, with prices off just under 4 percent, to $230,000.

In Tooele County, sales were off nearly 35 percent, with prices down 3.6 percent, to $185,000. Weber County sales were off about 26 percent, while median selling prices in the county -- the lowest along the Wasatch Front -- actually increased nearly 3 percent, to $166,600.

Once a stellar outperformer amid the nation's economic downturn, Utah's economy is showing significant signs of deterioration, with job losses now the norm.

The Governor's Office is projecting unemployment will increase significantly this year. Job losses, once contained to home construction and related sectors, have expanded into other areas. Retail sales are expected to drop as more Utahns cope with job losses and pay cuts.

Economists say consumers have a reason to be fearful about buying a home and having the value of their property drop after they do so.

Economist Mark Zandi of Moody's Economy.com has stressed that prices in Salt Lake City are certain to decline more, through this year and into 2010.

Owners of higher-priced homes continue to feel the most pain. Wasatch Front Realtor Sheryl Hornok said the values of homes priced at $300,000 and under haven't declined as much as homes priced at more than $400,000. Many priced above $600,000 to $700,000 have had to be deeply discounted before they sold.

Industry Leaders Offer Perspective on Utah's Commercial Real Estate Market

Good article from UtahPulse.com. It represents my experience as well.

Industry Leaders Offer Perspective on Utah's Commercial Real Estate Market


by EDCUtah

The doom and gloom in the commercial real estate sector is not nearly as bad as it's made out to be. That's the perspective of Vasilios Priskos, principal broker and owner of commercial real estate firm InterNet Properties, Inc. He says the recent Commercial Real Estate Symposium held at the Salt Palace Convention Center felt more like a funeral than an industry pep talk.

"Utah's commercial real estate sector is not nearly as gloomy as one might think," says Priskos. "Part of the problem is the dam that's been put in place by lenders. We are still seeing market activity and we are still leasing properties. The difficulty is in obtaining financing for new projects or in refinancing."

In truth, he says, a lot of cash sits on the sidelines, but a lot of new interest in Utah exists.

Mark Bouchard, senior managing director in the Salt Lake office of CB Richard Ellis, offers similar sentiments, especially regarding market liquidity.

"The greatest impact on Utah's commercial real estate sector, as a whole, is the lack of liquidity in the market," he says. "We hear stories that banks are lending money again and that may be true, but the rules have changed."

What he means is that lenders have changed their credit rules and equity requirements, making it more difficult to access the cash that was so readily available during the boom from 2004 to 2007. Consequently, he expects minimal business expansion or new developments in 2009.

Mark Alexander, vice president of investment and office for Coldwell Banker Commercial, agrees. He says a number of banks have stopped lending money altogether for commercial real estate and he doesn't expect to see more liquidity in the market until the second half of 2009.

"There is still an appetite to buy, but until lending and underwriting restrictions loosen up, investors will generally sit on the sidelines," he says. "A few investors are willing to pay higher closing costs and accept higher interest rates, but that's the exception."

Alexander says interest in commercial real estate investments slowed during the last half of 2008, as investors watched and worried about what would happen in the market, but the phones are starting to ring again.

"Investors are anticipating, expecting, hoping for change, which has regenerated some interest," he adds. "I have full confidence interest will slowly grow and as we get into 2010 we'll see much better activity in the commercial real estate investment arena."

It is true that Utah's office market is seeing increased vacancies, which are expected to increase slightly during 2009, according to Bouchard. The retail sector is also being pressured, as businesses experience the negative impact of the economy.

"Some small businesses may not survive the economic hit," he says, "but most will and those that do will be stronger."

Utah's industrial market is still fairly strong and the commercial real estate sector is fundamentally sound. Nonetheless, Bouchard expects 2009 to be a year of transition -- not a great shift to the worse -- but not a great deal of improvement either.

"Everyone expects the markets will get better, but coming out of the recession doesn't mean the economy is fixed, it just means we have found the bottom. I don't expect the real growth to occur until 2010," he says.

That doesn't mean the phone has stopped ringing.

"We are still receiving a lot of interest from out of state businesses," Bouchard says. "People are looking for a place they can do business and be successful. Utah has a lot of great dynamics, the least of which is a very well-run state government. Utah also receives high marks for its stability and business-friendly environment."

Mike Lawson, CEO of Commerce CRG, says he has never seen an economic situation quite like the current one, but adds that Utah went into the situation in a healthy fashion and will emerge significantly stronger than most states.

"Utah tends to lag the national economic fluctuations," he says. "We don't hit the tops or the bottoms of the national economy and we are going to come out of it okay."

Lawson says there will always be a certain amount of tension in the market. His advice to Commerce CRG clients is to keep planning for tomorrow.

"Utah has a pretty sharp business community in terms of strategic planning and there is no reason to stop planning now," he adds. "Opportunities exist, even in times of transition, within every specialty area of commercial real estate."

Lloyd Allen, NAI Utah Commercial Real Estate Service's senior vice president of brokerage services, recognizes the liquidity issues of the last half of 2008, but lends some interesting perspectives for 2009. He says investors had to be very cautions during the last six months because the data showed deals closing at cap rates in the six percent range. With the projected negative economic conditions, investors were not willing to take a six percent cap and so were sitting on the side lines. The last few months, however, have seen some higher caps of seven, eight and nine, and in one unique deal even a 10 percent cap rate.

"These types of numbers can encourage investors to go after opportunities that may begin to exist in the market," he adds. "These types of opportunities can bring money from parties that have not been the traditional financiers of the last few years. There is a sentiment that these types of transactions can create more movement in the market."

A few other noticeable changes in the market have occurred in the last few months, according to Allen. Industrial lease rates have begun a small move down, which was not seen late last fall. In the office market, owners are becoming more willing to make deals, even if they are not the terms that they had hoped for.

"Experienced brokers have said that they have been busier the last two weeks than they were the last two months," Allen says. "There is hope that all of these factors can keep Utah's commercial real estate market from seeing as significant of decreases as has been experienced in the residential market."

Monday, January 26, 2009

Utah bucks the national trend - home prices up?

I find it hard to believe that prices were up in Utah during 2008. There are a lot of higher priced homes that have lost 25-40% of their value over the last year. Homes that sold for $800k-$1m in 2006 and 2007 are now on the market for $500-700k.

Here's the article from the Salt Lake Tribune.

Report: Utah an exception as house prices dropped in 70% of U.S. states in 2008

By Dan Levy

Bloomberg News


Home prices fell in 34 U.S. states in 2008 as it became harder to get a mortgage and foreclosures hammered property values, First American CoreLogic said.

Prices for single-family detached houses fell a record 10.6 percent nationally, the biggest annual decline in data that goes back to 1976, Santa Ana, California-based First American said today in its year-end report.

"The geographic breadth of the decline expanded in 2008," Mark Fleming, First American's chief economist, said in an interview. Even markets with few foreclosures "are being drawn in by fundamental economic conditions."

The U.S. economy is "deteriorating rapidly" after 2.6 million job losses in 2008, Christina Romer, President Barack Obama's pick to head the Council of Economic Advisors, said Jan. 15. First American, which sells mortgage data, reported defaults or foreclosures on 3.4 million properties in 2008, up 76 percent from 2007.

U.S. home prices have dropped 18.5 percent from their peak in July 2006 and are now at May 2004 levels, First American said.

California led last year's decline with a 27 percent drop, followed by Nevada at 23 percent, Arizona at 19 percent and Florida at 18 percent, First American said. Prices tumbled 14 percent in Rhode Island, 10 percent in Minnesota, 9 percent in Wyoming, New Hampshire and Maryland and 8 percent in New York.

Declines of 3 percent or more occurred in 24 states and the District of Columbia, according to First American.

"The magnitude of the declines is similar to what we experienced previously" in regional recessions that hit Southern California and greater Boston in the early 1990s and eastern Texas and Oklahoma in the early 1980s, Fleming said.

Before last year, the only annual price drop for U.S. houses in the last three decades was 2.9 percent in 2007, according to First American's data.

Prices rose 4.2 percent last year in West Virginia and 3.6 percent in Texas and South Dakota. Montana prices rose 2.6 percent, Mississippi saw a 1.7 percent increase, Utah a 1.5 percent gain and New Mexico a rise of 1.3 percent, according to First American.

'Surprise' jump in existing home sales

Money.CNN.com is 'surprised' to see a jump in December's existing home sales and reports that western states saw a notable surge. My own experience saw this coming in our local markets. Buyers are getting off the fence and are looking for bargains. There are definitely bargains to be found and a crucial part of the recovery process is that overpriced properties are re-priced and sold at the lower prices. I think one of the most important factors in this jump was the result of lower interest rates.

One interesting side note from my own limited research: lower price homes closer to the urban centers are doing the best. I looked specifically at the absorption rates at various price ranges in Salt Lake City vs the rest of the county and Orem vs. the rest of Utah County. The population/economic engine cities obviously have stronger real estate markets and are doing best at homes/condos priced under $250k. That part of that market has maintained pretty strong absorption and only suffered minimal drops in value through the market downturn.

More to come.

Utah ranks pretty well

This morning CNN.com had interesting rankings of each state based on their unemployment rates, state budget deficits, and foreclosure rates. It is an interesting snapshot of how each state compares with the rest. Here they are.

Utah's unemployment rate is well below the national average. A recent post of a Salt Lake Tribune article tells the whole story.

I believe the Utah budget deficit is something like $1.8 billion. This chart would be more effective if they had shown the deficit as a percentage of the total budget. That would be more helpful as a comparison tool to see which states (big or small) were looking at the hardest hits.

I was glad to see Utah is lower on the foreclosure scale though we're obviously feeling some of the pain. I expect we'll continue to see a rise in foreclosures but I don't see us moving high in the state rankings.

Overall, Utah is feeling some pain but is not as bad as others or as the nation as a whole.

More to come.

Lending Drops at Big U.S. Banks - WSJ.com

Lending Drops at Big U.S. Banks
Top Beneficiaries of Federal Cash Saw Outstanding Loans Decline 1.4% Last Quarter

January 26, 2009
By DAVID ENRICH

Lending at many of the nation's largest banks fell in recent months, even after they received $148 billion in taxpayer capital that was intended to help the economy by making loans more readily available.

Ten of the 13 big beneficiaries of the Treasury Department's Troubled Asset Relief Program, or TARP, saw their outstanding loan balances decline by a total of about $46 billion, or 1.4%, between the third and fourth quarters of 2008, according to a Wall Street Journal analysis of banks that recently announced their quarterly results.

Those 13 banks have collected the lion's share of the roughly $200 billion the government has doled out since TARP was launched last October to stabilize financial institutions. Banks reporting declines in outstanding loans range from giants Bank of America Corp. and Citigroup Inc., each of which got $45 billion from the government; to smaller, regional institutions. Just three of the banks reported growth in their loan portfolios: U.S. Bancorp, SunTrust Banks Inc. and BB&T Corp.

The loan figures analyzed by the Journal exclude some big TARP recipients that haven't reported fourth-quarter results yet, such as Wells Fargo & Co.

The overall decline in loans on the 13 banks' books -- from about $3.36 trillion as of Sept. 30 to $3.31 trillion at year's end -- raises fresh questions about TARP's effectiveness at coaxing banks to reopen their lending spigots.

"It has failed," said Campbell Harvey, a finance professor at Duke University's business school. "Basically we have dropped a huge amount of money ... and we have nothing to show for what we actually wanted to happen."
Credit Constraints

In a survey last month of 569 U.S. companies, Mr. Harvey and researchers at Duke and the University of Illinois found that 59% felt constrained by a lack of credit. Many of those firms are shelving expansion plans and cutting jobs as a result of funding shortages, according to the survey, which is expected to be released this week.


Bankers say it is unfair to expect them to funnel a large portion of their government capital into loans so soon after receiving it. They say it takes time to make prudent loans and to attract new deposits that will allow them to lend out their new capital efficiently.

Demand for low-risk loans is also ebbing as consumers and businesses rein in their spending and try to conserve cash, according to bank executives. Even though mortgage rates are down, for example, applications in the week ended Jan. 16 declined about 10% from the previous week, according to the latest data from the Mortgage Bankers Association.

Meanwhile, federal regulators have been pushing many banks to set aside extra capital to cushion against losses. Bankers say that is at odds with the government's encouragement to make more loans.

The fact that loan portfolios are shrinking at many of the largest TARP recipients underscores how few strings Treasury Department officials attached to the infusions. That has made it hard to prevent banks from using the money to pay dividends, make acquisitions and fund bonuses for top executives.

Federal officials argue that the downturn in lending would have been much more acute without the TARP funding, and that attaching additional strings to the money could have led banks to make risky loans or to refuse to accept the government capital.

Obama administration officials acknowledge that TARP hasn't managed to jump start lending as intended, and say they plan to overhaul the program to address the shortcomings. TARP recipients must submit lending data to the Treasury Department by the end of January, though industry officials don't expect the disclosures to divulge much more than what banks already include in routine regulatory filings.

Around the world, bankers are under pressure from regulators and lawmakers struggling to prop up the financial system. Politicians in the U.S. and overseas are ratcheting up their rhetoric about banks needing to do their part. On Sunday, Franz Müntefering, chairman of Germany's Social Democrats, said in an interview with a German newspaper that "most of the bankers are competent and responsible, but there are also some beatniks, pyromaniacs and gangsters."
New Student Loans

In a sign that banks are feeling political heat, Citigroup is expected to announce Tuesday a plan to use some of its TARP money to finance tens of billions of dollars in new loans this year, according to people familiar with the situation. The push will include credit cards, student loans and mortgages aimed at specific segments of the population, one person said.
[TARP Loan chart]

Of the $45 billion it got from the government, Citigroup last fall invested $10 billion in Fannie Mae's short-term commercial paper, which the company views as relatively low risk, according to the person familiar with the matter. The remaining $35 billion hasn't been put to use yet.

Even critics of TARP's capital injections say that they steadied financial institutions and soothed investors, averting possible catastrophe. The first capital infusions were announced about a month after Lehman Brothers Holdings Inc. filed for bankruptcy protection, igniting fears that other shaky financial companies could collapse.

The fourth-quarter decline in overall loan volume at the 13 banks coincides with an industry-wide retreat from broad swaths of consumer lending. Banks have scaled back on mortgage lending, canceled or substantially reduced many home-equity and credit-card lines and, in some cases, simply stopped making certain types of loans unless they're guaranteed by the U.S. government.
Recession Woes

Despite dismal economic conditions, many bankers insist they are making every good loan that they can. Bank of America and J.P. Morgan Chase & Co., which got a combined $70 billion in government capital, said they originated a total of $215 billion in loans in the fourth quarter. Their combined loan portfolios shrank by about $28 billion in the same period.

Scott Silvestri, a Bank of America spokesman, said the Charlotte, N.C., bank's loan balances declined in part because more borrowers have been paying off their debts. In addition, "there were fewer opportunities to make high-quality loans because of the recession," he said. A spokesman for J.P. Morgan declined to comment.

The loan volumes that banks disclose publicly only reflect outstanding loans on their books, many originated years ago, not the actual amount of new loans made in a given quarter. While several banks reported the amount of new loans they made in the fourth quarter, they didn't disclose comparable figures from prior periods.

"What you can't tell is how low they would have sunk in the recession we're in were it not for the TARP money," said Walter Moeling, a partner in the banking practice at law firm Bryan Cave LLP.

The overall decline in loan balances during the fourth quarter reflects the huge hurdles and conflicting agendas that need to be overcome before credit can start flowing smoothly again.
[Lending Drops at Big U.S. Banks] European Pressphoto Agency

Loans have declined at Citigroup.

For instance, many banks have said they are using TARP funds to cover current or anticipated defaults on a wide variety of loans.

At the same time, shareholders at many institutions have demanded that they slim down their balance sheets to reflect the new risk-averse environment.

At BB&T, a Winston-Salem, N.C., bank that got $3.13 billion from TARP, fourth-quarter lending volume rose about 2%, or $2 billion. While BB&T is making new loans, Chief Executive Kelly King said the bank invested much of its taxpayer capital as a way to earn a decent return while shunning risk.

"We parked it there, and will redeploy it as quickly as we can, not in a panic," Mr. King said last week on a conference call with analysts. "We're not going to make a bunch of bad loans."

The overall loan decline likely understates the magnitude of the industry's retrenchment.

In normal times, banks would make loans and then sell many off to investors or financial institutions. But that practice has ground to a halt, so more loans today are staying on banks' books. As a result, some banks' loan portfolios could appear larger than they would have in the past, even though they aren't actually making more loans.

Bank balance sheets also have been inflated as more companies draw on credit lines that banks committed to before the financial crisis erupted. Last fall, an increasing number of borrowers started tapping those lines, banks say, either because other types of credit were evaporating or out of an abundance of caution.

For example, KeyCorp, where total loan balances declined by about $200 million in the fourth quarter, saw a $1.3 billion leap in its commercial, financial and agricultural loans. Chief Financial Officer Jeffrey Weeden said that was primarily the result of clients dipping into their revolving lines.

KeyCorp, which is based in Cleveland and received $2.5 billion in federal capital, made or renewed $5.7 billion of loans in the fourth quarter. But KeyCorp has stopped making student loans unless they're backed by the U.S. government.
Printed in The Wall Street Journal, page A1

As Hotel Vacancies Rise, So Do Risk of Defaults

From the Wall Street Journal.


As Hotel Vacancies Rise, So Do Risks of Default
January 26, 2009

By KRIS HUDSON

The downturn in the U.S. hotel industry is becoming so acute that it has thrust the sector into crisis, leaving vacancies at a 20-year high and putting many properties in danger of missing payments to lenders.

In the wake of cutbacks by business and leisure travelers alike, U.S. hotels this month are expected to post their 15th consecutive month of declining occupancy, longer even than their 12-month losing streak after the Sept. 11, 2001, terrorist attacks.

That occupancy drain, coupled with declining room rates as hotels compete for customers, is expected to result in the hotel industry's steepest decline in revenue per available room since 2001, according to market-research company PKF Consulting Inc. The report, scheduled for release today at the American Lodging Investment Summit in San Diego, says that revenue per available room will fall by 9.8% this year.

If conditions are as weak as expected, PKF estimates that nearly 20% of a sample of 1,500 U.S. hotels that it studied won't generate enough cash flow this year to cover interest payments on their mortgages, up from nearly 16% last year. This year's projection is on par with the most recent high of 20.7% in 2003 but still short of the 1991 recession's 25% tally, according to PKF.

U.S. hotels now carry roughly $250 billion in cumulative mortgage debt, according to Foresight Analytics LLC. Many hotel owners who can't generate enough cash to cover their debt service in this recession will avoid default and foreclosure by digging into their own or partners' resources to make up the shortfall or by negotiating a compromise with their lenders.

While the industry's fallout so far appears to be similar to that in previous downturns, "the difference this time comes from both the speed at which the industry fundamentals have deteriorated and the protracted nature of the current decline," PKF President Mark Woodworth said.

Exacerbating the industry's troubles is a flood of new rooms hitting the market because of development projects started during the real-estate boom of recent years. The estimated 125,000 net new rooms projected to debut in each of this year and 2010 amounts to a 2.5% annual increase in supply, according to Smith Travel Research. That's well above the 20-year average rate of 1.5% -- and it comes as demand for rooms is tanking.

Among commercial real-estate categories, the hotel industry rises and falls the most dramatically in reaction to economic cycles. That's because, unlike office buildings and shopping malls with long-term leases, hotel occupancy and rates change on a nightly basis as customers come and go at will. In a downturn, the fallout is significant; PKF expects the average occupancy among U.S. hotels to drop to 57.6% this year, falling by 3.2 percentage points, to its lowest level in the 20 years that Smith Travel Research has tracked the figures.

"The only word that comes to mind is 'unprecedented,' " said Bjorn Hanson, a lodging and tourism professor at New York University, referring to the speed and depth of the industry's decline in recent months. Still, Mr. Hanson projects a hotel delinquency rate of 5% to 6% this year, in line with the rates registered in 2002 and 2003 and nowhere near the 1991 delinquency rate of 14.2%.

Among the hotels that have fallen into delinquency or default on their mortgages during this recession is the 942-room Resorts Atlantic City casino-hotel in New Jersey, which is delinquent on $350 million in mortgages and facing foreclosure actions. Others late on their payments include the Marriott Courtyard Grand Cayman in the Caribbean, the 231-room Northland Inn near Minneapolis, and Westin hotels in Tucson, Ariz., and Hilton Head, S.C., according to credit-rating firm Realpoint LLC.

Write to Kris Hudson at kris.hudson@wsj.com
Printed in The Wall Street Journal, page B3

Wednesday, January 21, 2009

Utah unemployment up sharply

We're definitely following the trend of the nation, though well behind it. Here's the link and the article is below.

Economic woes hit home: Ranks of Utah's jobless soared in December

Unemployment stretches beyond construction sector

Unemployment in Utah jumped sharply in December as job losses spread beyond the hard-hit construction industry, the state Department of Workforce Services said Tuesday.

The seasonally adjusted jobless rate was 4.3 percent last month , up 0.6 percent from November but still well below the U.S. unemployment rate of 7.2 percent in December.

Utah's unemployment rate was 2.9 percent in December 2007, when the U.S. recession officially began.

The number of jobs in Utah contracted by 1.9 percent in December. Utah's economy has lost 24,600 jobs in the 12 months ending Dec. 31, although state economists consider that estimate by the U.S. Bureau of Labor statistics to be overstated by as much as 10,000.

"I think it's too aggressive," Workforce Department economist Mark Knold said. "Does that mean Utah doesn't have job contraction? That's not what I'm saying. I just don't think our contraction is that deep."

Job losses continued to be centered in construction, down 18.4 percent from December 2007.

But Knold said all industries lost jobs in December, continuing a trend that began in November.

"I do think the economy in Utah definitely got worse in December. There's no doubt about it."




Wednesday, January 14, 2009

Change in the wind, part 2

I'm still feeling good about my "Change in the wind" predictions regarding the overall economy. There will definitely be some rough waters ahead but the economy is headed in the right direction and we've seen the scariest times behind us.

For those with cash, buy carefully and buy a lot.

More market updates

I've been terribly busy and haven't had time to stay on top of all the market updates, etc. There is a lot of activity in the residential market right now which is a great sign for Utah's economy.

Not unexpectedly, the media is "piling on" stories about how commercial real estate is headed off a cliff. The media can generally be counted on to trumpet the up cycle in the market and then the down cycle in the market. I don't believe they have the intention of making the mania and then the panic worse but they do. Read an article about multifamily in the Wall Street Journal that seemed to suggest the multifamily market was headed off a cliff. There are a few large complexes in New York City that were
speculative purchases and they are struggling. I am not surprised. At the end of the article it noted that Fannie Mae defaults have jumped from 0.1% to 0.27%. Obviously that is worth noting and paying attention to but it is still an extremely low default rate and hardly cause for fire sale prices and lenders pulling out of the market. The media is a business and sensational headlines attract dollars--too bad they sometimes do that at the expense of better judgment.

Anyway, glad to read about the credit markets thawing quite a bit.

Signs of credit market thaw begin to emerge (MSNBC)


A few articles about commercial real estate in Utah.

Downturn takes toll on retailers, just as Utah was becoming home to expansions (SLTrib)

More bad economic news ahead for Utah, guv's office says (SLTrib)

Retail disappearing act: South Valley storefronts (SLTrib)


More later.....

Thursday, January 8, 2009

Utah Utes are the National Champions

Rick Reilly said it best at espn.com.

Let's get a national playoff system going. It's the only real solution.

But I digress.

More later.....

Market updates

Several good articles have been published in recent days with market updates on 2008 year-end numbers. I'll summarize later when I have the time.

Commercial Real Estate Brokerage: Salt Lake County Office and Industrial Markets Show Strength, Despite Gloomy Economy (UtahPulse.com)

Apartment Landlords Find What Goes Up, Does Come Down (WSJ)

Commercial Property Loses Shelter (WSJ)

Tuesday, January 6, 2009

Utah is very well governed

Yesterday marked the inauguration of Governor Huntsman to his second term. He has proven to be a very effective and very popular governor. I personally have been pretty pleased with Governor Huntsman and, though I wish the state legislature were more balanced, I'm of the opinion that Utah is very well governed.

This reminds me of the recent report by the Pew Center that ranked Utah as the best-governed state in the nation. I suggest you follow the link and read about Utah's advantages. We got high rankings in the categories related most directly to commercial real estate.

More later.....

Utah just turned a little greener

Kudos to Kennecott Land and their parent company Rio Tinto for building their new corporate headquarters to LEED Platinum specifications. The green movement is catching steam in Utah with several LEED certified buildings under construction.

On a side note, I'm feeling a little trepadation about my prophecy for 2009. I'm not inclined to back away from it, just a little surprised that I memorialized it on the web. I guess we'll see how things play out.

More later.....

Sunday, January 4, 2009

Change in the wind

I'm going to go out on a limb and predict that the psychology of the American public has turned the corner and better times are ahead. I fully expect a lot of pain is still ahead for all aspects of our economy but positive signs are starting to show.

I'm of the opinion that the most important factor in the entire economy is public sentiment and it sure feels like we've seen the worst of it. History has proven that we are pretty resilient psychologically as times turn tough and quick to bounce back when given a good excuse. We don't like feeling things are bad and have been known to engage in a little self-delusion by stretching to find something good to believe in. We'll even go so far as to ignore the bad news if it doesn't fit with with what we want to feel.

Between Barack Obama's historic election, Christmas, and the New Year, the public has had enough good things to focus on that they're ready to feel good about the economy too. After a few months of horrible economic news, we just went through the holiday season and realized we still have much good in our lives to celebrate and the world hasn't come to an end. We can start writing "2009" on everything and, everytime we do, be glad that 2008 is in the past. Whether you agrees with Obama's politics or not, having a new president and new administration in Washington brings the notion of a fresh start with new ideas.

All that combined indicates to me that there is a renewed optimism that will carry into the public psyche. People will start (cautiously) spending money on all the deals that are in the marketplace. Business owners won't be so quick to layoff employees. Banks will hopefully be a little more workable on existing loans and start lending more money to worthy borrowers and properties. I don't want to minimize the pain that still lies ahead--lots of layoffs, bankruptcies, and foreclosures still need to get cleaned out of the system.

The first thing that needs to change in the economy is the public psychology and I think it has made crucial turn. As Mr. Gibbs says to Captain Jack Sparrow in the first "Pirates" movie: "I think I feel a change in the wind, says I."

More later....

Friday, January 2, 2009

Feet on the street

Spent the last couple of days with clients interested in executive homes in north Utah County. I've been amazed at the low prices of the foreclosures and short sells--there are some great deals to be had. I'm also encouraged by the amount of activity in the market that I am seeing myself and hearing from other residential agents. Several houses we've wanted to look at have come under contract in the last few days as well. It seems that buyers in the upper price ranges are starting to come back into the market. I expect there is still more pain to come in the higher-end residential market but this is certainly a positive sign.

More later.....