Construction Forecast
During the past couple months, a number of media outlets have reported that new single-family home construction has seen a slowdown this past year. Hitting its peak in 2005, single-family construction saw its sharpest drop-off in September, possibly the result of August's credit crunch, says James Wood, director of Bureau of Economics and Business Research at the University of Utah.
The good news is that economists like Kelly Matthews, Wells Fargo executive vice president, say Utah is not overbuilt like other areas of the country. In fact, Matthews says we actually need as many homes as are being built because of the state's strong demand for housing. Matthews suggests a decrease in home prices would clear out excess inventory and allow builders to resume single-family construction, which Wood expects to happen in the spring of 2009. Aside from single-family construction, the commercial sector is actually in the midst of a boom. According to the September issue of "Utah's Economy", nonresidential construction in Utah is expected to increase by at least 25 percent for 2007.
"Nonresidential construction usually lags behind residential construction by a year or two, and that's exactly what's happening here," Wood told the Deseret Morning News. The multi-family market is also booming, according to Wood. He isn't sure how long the growth will last but says the fundamentals are favorable. There could be a retrenchment, however, if buyers are unable to secure loans when large condo projects are completed.
But Lawrence Yun, chief economist of the National Association of REALTORS®, remains optimistic about the availability of financing and says most credit problems are being felt in the subprime arena while other mortgage sectors are stabilizing. Conventional loans are readily available, FHA loans are becoming popular with those with less-than-perfect credit, and even jumbo loan rates are edging downward.