Summit County logs state’s biggest construction decline
May 16, 2008
Housing construction in Summit County dropped by 77 percent in the first quarter of 2008 compared to the same quarter last year, the biggest decline of any county in the state, according to the University of Utah’s Bureau of Economic and Business Research.
The number of new building permits is falling at a record-breaking pace, matching a statewide slowdown in the building of houses, twin homes, apartments and condominiums.
Statewide, officials reported a 58.2 percent decline in total residential permits, the report said.
Building-permit numbers were gathered from Park City, Coalville, Kamas and Oakley as well as unincorporated Summit County.
Summit County Building Official Dallas Monsen said spring is usually a slow time of year. "Everyone knows the economy is bad," he said. "A lot of people are biding their time."
The first quarter of 2008 ranks as the most severe contraction ever reported in one quarter, surpassing the fourth quarter of 2007, which had a 53.4 percent drop.
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"It’s the most serious decline we’ve had in the last 20 years," said James Wood of UBEBR. "It was so sudden."
Wood said part of the reason for the astronomical housing decline has to do with the fact that no new condo developments are currently underway in Summit County. "It’s better to look at things in terms of the whole state," he said, "because in some cases, like Park City, you get these lumps of development. We’re dealing with fairly small numbers and we’ve had a harsh winter. We were at very high levels to begin with but there’s a lot of downward momentum."
Nn terms of the rate of decline. Utah County ranks second worst. In the first quarter, it went from 1,458 new permits in 2007 to 408 in 2008, a 72 percent decrease.
Utah’s first-quarter performance ranks fourth worst in the nation. Only Rhode Island, Arizona and Illinois had greater declines in residential permit activity in the first quarter of 2008, according to Wood’s housing survey.
In the first quarter of 2008 only 2,234 residential building permits were issued statewide, the survey said. If those numbers hold for the rest of the year, Utah will build fewer than 10,000 new homes for the first year since 1991, according to Wood.
The peak for new residential building permits was in 2005 when the state handed out about 28,000 housing permits. In 2006, the state suffered an 8 percent drop. "The first half of 2007 was pretty orderly," Wood said. "Then the credit crisis hit and the sub-prime market disappeared."
Wood said concern over the economy has reduced the number of people able to purchase homes. It has also made qualified buyers more hesitant.
"Ultimately our industry gets it," Mike Brodsky, owner of Hamlet Homes, said. "Except in very selected areas, people aren’t bringing out new products. We’re seeing segments of the market slow down, which is pretty typical in our industry. We’re just coming off the longest period of prosperity we’ve seen since World War II."
Hamlet Homes owns the condos at Bear Hollow, some of which have been on the market for three years, Brodsky said. However, he added the price of the residential units remains high. "The prices today are still up significantly from what they were when the condos were first put on the market," he said.
General contractor Doug Barndt has been building high-end homes in Park City for more than 30 years. He is currently working on a 9,000 square-foot home in the Snyderville Basin. He said many of the recent residential building permits were speculative. "What a downturn like this does is weed out some of the builders," he said. "It thins out the market."
Barndt has plans for two more large homes in the area. "I’ve seen four cycles like this where the market thins out," he said. "In my opinion, it’ll be eight months and away we go again."
Summit County homebuilders have felt the squeeze, said Sarah Weinberg, a member of Build Green Utah and part of the Park City Homebuilders Association. "I don’t see this downturn as something that’s going to turn around right away," she said.
Weinberg said the downturn has forced builders to reconsider old construction methods in favor of green development. "We want to help builders prepare for the future," Weinberg said. "Green housing is where the public wants to go, and builders should take the lead."
Dennis Hanlon is a Park-City based Realtor with Summit Sotheby’s International Realty and a member of the Rocky Mountain Resort Alliance. He said his agency’s home sales are "definitely down" and residences are taking longer to sell. "Our average is about six months on the market," he said.
Hanlon said home prices remain high despite the downturn. "Buyers have unrealistic expectations," he said. "They read about how bad the housing market is and think they’ll go to a resort town and get something for a lot less."
He said having fewer new homes on the market isn’t a bad thing. "If they were building a lot of new homes right now it would flood the market," he said.
Despite the downturn, Wood said non-residential building remains at high levels. "Commercial development usually lags three years behind residential," he said. "You get homes, then retail comes in." Since the peak of residential construction was in 2005, it’s not surprising that 2007 was a near-record year for commercial projects, he said.
In 2007, commercial construction totaled $2.1 billion. That ranks second only to 1997’s commercial total of $2.26 billion.
Housing by numbers
77 percent decline in new building permits compared to the first quarter of 2007.
58.2 percent decline in total building permits for homes, twin condos and apartments for the first quarter of 2008.
65.2 percent decline in the first quarter for new single family homes
48.9 percent fewer condos and twin homes in the first quarter 2008 compared to the same time last year
6 total new residential housing permits in Park City proper.
1991 was the last year the state issued fewer than 10,000 housing permits