Picture looks rosier for Utah home construction industry

SALT LAKE CITY — There will be 50 percent more new homes in Utah in 2010 compared to 2009, and the upward trend is likely to continue, according to a new report from the Bureau of Economic and Business Research at the University of Utah.

The vast majority of new homes will be sold at less than $300,000 and will have serious competition from the short sale and foreclosure market, where near-new homes are still being sold below cost, the report said.

"We feel like we're doing a slow, gradual pull out of the abyss," said Salt Lake Home Builders Association Executive Officer Curt Dowdle.

The 15-page U. report delves into the history of the residential construction market, going back to the 1950s, the last time when homebuilding rates sank into the negative.

Since then, the period of spring 2006 through summer 2009 has been the worst time to be in the home construction business here.

The decline started in Salt Lake City in about May 2006 because of several factors, including mass speculation in residential real estate, Dowdle said. The problem was compounded by failing financial markets in 2007 and 2008, after which some government assistance was offered to first-time homebuyers.

An industry expert for 30 years, Dowdle believes that, when people look back, 2009 will have been among the worst years in state history for new homes. He expects a 100 percent improvement in new-home building by the end of the year and even higher numbers in 2011.

"That's a good sign, but it doesn't mean we're out of the woods," he said.

Even with an uptick in the last several months, the industry is still in trouble, according to the report. Many small homebuilding companies have gone out of business, leaving only the large and well-financed companies to compete.

And there are still several important hurdles for even those high-producing homebuilders to overcome.

The biggest problem is that job growth runs parallel to new home growth, and Utah is not projected to recover full employment anytime soon. The Utah Department of Workforce Services is predicting state unemployment rates will remain near 7 percent through the end of the year.

Further, the number of individuals in the population between the ages of 20 and 29 is expected to decrease until at least 2012, leaving fewer young people in the housing market.

That could be exacerbated by the size of families increasing slightly. Based on U.S. Census Bureau data, the report found that the number of households will decrease in coming years compared to the population.

Home prices are likely to continue to slide because of negative equity, according to the U. report, which was authored by bureau director James Wood.

In addition, a springtime surge of new home growth could slow down in the next two months because the uptick was directly related to federal tax credits, which have since expired.

"Now, most builders have seen not as much traffic, but the traffic they do see is more creditworthy," Wood said. "I hope my optimism holds true."

For a copy of the report, visit www.bebr.utah.edu.

e-mail: rpalmer@desnews.com