Looking for the bottom
April 24, 2009
Sometimes recovery isn’t possible until you hit rock bottom.
Mark Knold, chief economist for the Utah Department of Workforce Services, believes that’s true for Utah’s recession.
The question on everyone’s mind is, "When will that be?" Knold aggress with the optimists that it could be as soon as later this year.
Knold shared his views Thursday in Midway at the Mountainland Regional Council on Workforce Services.
When a recession hits its low point, people start to feel like they might be OK the worst is behind them and they survived it.
Knold believes the most significant bottom for Utah’s economy is housing prices. Luckily for Park City homeowners, affordable housing advocate Scott Loomis and Realtor Jess Reid both believe environmental factors make the area unique from the rest of the state.
Recommended Stories For You
For Park City, the bottom that may need to be reached is on Wall Street.
"When people believe the stock market has bottomed and is rallying, that would help our market. Next, a lot of our buyers who are frozen would have the confidence that we’re past worst of it, let’s go make a deal. Then we’ll have more buyers and more activity," Reid said in a recent interview.
That bottom may already have come, Knold said, adding that he believes March was the lowest point of the current recession. The problem is that stock markets can rally and drop many times before averages rise steadily.
But assuming the stock market has hit bottom and is recovering, Knold said Summit County’s home prices might still be too high. Another graph he showed from Moody’s Economy.com included Summit with Tooele, Juab, Salt Lake and Utah Counties as Utah’s most over-valued areas.
"If interest rates are as low as they are, and the housing market still isn’t stimulated, then something else is wrong. Probably it’s that prices are too high," Knold said.
Wages in northern Utah have been increasing 16 to 26 percent over the past few years. Home prices have gone up 33 to 60 percent, he said.
The good news for this scenario, he said, is that the state is full of people in their mid to late twenties ready to buy a home as soon as they can afford it.
"I don’t think Utah is overbuilt," he said. "I think we have pent-up demand."
Once inventory goes down, residential construction workers will be back to work, and commercial construction will follow. Then Utah will recover. Knold puts that in late 2010, early 2011.
It will be a year behind the national trends, but Utah’s recession will never become as severe as the rest of the country, he said.
For many reasons, Reid and Loomis agree with this scenario for the state, but both say Summit will see different trends.
For starters, the second-home buyers in Summit come from out of state, so Park City will follow national trends more closely, Reid said.
And home prices might fall, but only temporarily because the thawing will generate excitement as buyers make offers again, he said.
Scott Loomis, executive director of Mountainlands Community Housing Trust, said in a recent interview that Summit County wages may never catch up to home prices. It will remain a second-home market. That presents many benefits in the long-term, though, like quick recovery.
Unfortunately, Loomis isn’t sure buyers will be willing to pay the same prices they did in 2005 and 2006. That said, Park City is still more affordable than comparable ski areas, he added.