Utah recovery likely hinges on housing

Utah needs to eliminate its inventory of unsold homes, avoid big layoffs and get finances flowing with the congressional bailout plan in order to see economic improvement, according to Wells Fargo vice president and economist Kelly Matthews.

His comments came Thursday at the monthly meeting of the Utah chapter of Certified Commercial Investment Members, held at the Little America Hotel in Salt Lake City. Matthews said Utah's economic future is just as murky as that of the rest of the nation in many ways, as the United States attempts to weather the worst economic storm in decades.

If the economy can work through its mortgage financing problems, then it would likely take another 12 to 18 months before people saw noticeable improvement, he said.

Utah's economy is being deeply affected by the state's slumping housing market, which has led to the loss of thousands of construction jobs and residual impacts on numerous other business sectors. Unsold housing stock, stricter lending standards and faltering credit markets are all problems that are exacerbated by the fact that home prices are still too high for most people to afford, he said.

Matthews said that average sales prices would need to fall about 20 percent from current levels to bring Utah back into the realm of normal affordability.

"The numbers say we're not even halfway there yet," he said. "We've got to mark those homes down a little more aggressively to get them sold."

But he said that Utah's economy has seen hard times in the not-so-distant past and was able to rebound to become among the strongest in the nation, bolstered by solid job growth. Despite the current downturn, the state has continued to have low unemployment and even slight growth in jobs, he said.

"Recognizing what we've experienced in Utah, there isn't any reason to believe that at some point we can't return to actually being one of the best economies in the country," Matthews said.

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