Deseret News | State feeling chinks in economic armor

Reader comments
State feeling chinks in economic armor

TOT | 1:05 a.m. Feb. 24, 2008

How refreshing to have some truth from the Deseret News! Thanks Kirk! The only thing I would add is that the Utah economy is rapidly getting a lot worse and that the severity of the downturn will catch many Utahns by surprise. The wages here never justified the huge inflation in the price of houses. Once this spring selling season turns into a bust Utahns will start coming out of denial and into the light of reality. If you want a good price. WAIT.

Mark Washignton DC | 6:56 a.m. Feb. 24, 2008

Unfortunately, the story is not from the Deseret News but instead reprinted from the New York Times. Do you really think that the D News would refer to the church so lightly? And besides Utah writers are rarely so well informed on national trends and how ecentric Utah really is.

Recession Proof Mormon Church? | 8:06 a.m. Feb. 24, 2008

That is nonsense. Don't forget that tithe payers subsidize the Mormon church, and if tithe receipts drop due to the economic hardships on its members, the church would be forced to cut back spending--unless it has discovered a money tree we don't know about.

Comments continue below

Anonymous | 8:36 a.m. Feb. 24, 2008

Obviously, Deseret needed to run the story because everyone would ask why they didn't know about it. Either way, it's an embarassment. Thanks to NYT, we know that Utah media have been hiding something from us. It's not just me. I was at a party Saturday night and everyone there previously thought everything was great here. We'd either been told as such or not told what the NYT has. More confirmation that local media are in the business of helping business, not the general public.

Kevin | 8:39 a.m. Feb. 24, 2008

Great story. For those of us who watch the economy we knew that Utah would follow Arizona and Nevada. Expect a 40% price correction of your homes highest value over the next year or two. TOT is right wages haven't kept up and the cost of living is just going crazy. Utah is very dependent on Gas and as we approach $4 a gallon (yes it will happen in the next year or so) will really mess up Utah's economy. Kelly Matthew's the Wells Fargo economist for Utah said that if home prices didn't come down it would decimate Utah's construction industry. The state of Utah, economically speaking, is self destructing and we will soon be part of this recession. I hope everyone has saved for that rainy day...because it is today.

Joseph | 10:42 a.m. Feb. 24, 2008

There is no magic elixir to keep the economy humming if your nation isn't competitive. This is a steroid economy, and just as bad for our nation.

They say that we can boost the economy through government spending, but that comes from borrowing money which has to be repaid - often to foreign countries.

They say that we can boost it by slashing interest rates, but that leads to higher levels of foreign borrowing, too.

They say that we can boost it by continued mass immigration, but that leads to more costs than it pays for - new roads, schools, ad infinitum - and to a declining quality of life. It's also led to a less competitive workforce, as most immigrants (especially the illegal kind) are poorly skilled and poorly educated. It also leads to higher housing costs for young families, which leads to smaller families, which leads to increased need for immigration to "solve" the depressed birthrates it created.

The fact is that there are well-established ways to keep the eocnomy strong: have an educated populace, and reward people who work and who act responsibly, not people who sit on their rears. Have we been doing any of that?

Shelton | 10:41 a.m. Feb. 24, 2008

At last, a break in the break-neck sprawl of a western city! Any of us feel our hearts go out to slimy realtors, deceptive builders, and arrogant mortgage lendors as they sell their BMWs and fret in their McMansions?

Now perhaps the Valley can do some comprehensive planning and zoning, in time for the next wave.

40% Price Corrections? | 1:06 p.m. Feb. 24, 2008

Puh-LEASE! By the way folks, any good economist will tell you that the economy is whatever you make it to be.

You want a bad economy with rapidly depreciating property values? Then stop buying property and convince your friends and neighbors that now is NOT the time to buy. Prices will drop and in 12 months you can buy your dream house for pennies on the dollar.(Assuming you're still employed!)

You want a good economy with appreciating property values and job growth? Go buy some property (even a small patch of land worth only $500) and build something on it. Your friends will see the growth and instantly believe that things are a-okay because you're spending money. (Gotta keep up with the Jones!)

No matter which model you prefer quit shouting into the wind about how smart you are and how ignorant everyone else is. You're no smarter then the next person. (Yes, I am not any smarter than you or anyone else.)

40% declines? Get real! The day I see a $600k house drop in value to $340k, within a 12 month period, is the day that I will apologize to the nay sayers and literally eat my hat.

Thanks for Nothing | 1:12 p.m. Feb. 24, 2008

I live in a new development and everyday i see people looking at houses. I talked to my developer and she said she is seeing dozens of people look at homes but not ready to buy. Why? Everyone is afraid of a recession could happen this spring. I guess the NYT and Newsweek is right. Recessions are self full filling predictions. Way to go Utah!!! You just talked yourself into the recession.

PS - I don't live in a McMansion. I live in a development where the most expensive home is $310,000 and the biggest house is 3,000 square feet.

TOT | 2:22 p.m. Feb. 24, 2008

"40% Price Corrections" and "Thanks for Nothing" need to do a little study. 40PC, you'll need to find a tasty hat. Go look around "Flippers in Trouble" We will be expecting word of your hat eating progress ASAP. A lot of us have been watching and studying this implosion for more than two years.

To TOT | 3:06 p.m. Feb. 24, 2008

Some of us have been watching the market correction for 5 years (when exotic mortgages first came online). Predictions of 40 percent corrections are pure fantasy. Let me know when you buy today's million dollar house for 600 thousand. Or today's 300 thousand house for 145 thousand.

A 40 percent correction ain't gonna happen unless the entire economy completely tanks. Which, by the way, would mean that interest rates are back to double digits (remember the late 1970's/early 1980's?) and unemployment is in double digits. If this scenario comes true it will most likely mean that you're unemployed and/or can't afford the mortgage payment because a "good" interest rate is 12 to 14 percent.

Anonymous | 3:17 p.m. Feb. 24, 2008

Recessions are self full filling predictions.

No, not in an economy that relies on borrowed money to drive itself. People can't spend money they don't have if they're spending a good chunk of what they're earning paying off what they've already borrowed.

I doubt we'll be seeing 40% drops in real estate prices, but a 10-20% drop is easily possible.

Reader | 3:39 p.m. Feb. 24, 2008

I think the comment in the article from the state labor analyst that the LDS church is "recession proof" is inaccurate. The church is also affected when the economy slows down. The church has had to reduce its workforce and scale back its projects when the economy has had downturns in the past. The church also has investments and, like anyone else with investments, when the returns on those investments decrease, there is less income from those investments. Similarly, when personal incomes decrease, so do tithe payments to the church.

Anonymous | 4:30 p.m. Feb. 24, 2008

*** "I think the comment in the article from the state labor analyst that the LDS church is "recession proof" is inaccurate. The church is also affected when the economy slows down." ***

Very informative comments, Reader. I have to wonder if the Church wouldn't be more affected by a recession than anyone else, especially if the downturn is severe.

Paying your taxes isn't optional. Paying for your food isn't optional. Paying your mortgage or rent isn't really optional (for most people). While many people may regard the paying of tithing as non-optional, either, it could be the first thing to go when times get really tight - and most people today just aren't used to living in tight times.

Ernie the bargain seeker | 5:31 p.m. Feb. 24, 2008

$500 dollar piece of land?
Cut me in partner!
I'm a wild eyed dreamer just like you!!!

TOT | 5:49 p.m. Feb. 24, 2008

I can't help if the responder to me won't even take one minute to go to "Flippers in Trouble". When you google it the Sacramento site comes up first. There is a Phoenix site as well. There are many houses listed there that have lost MORE than 40%. I can't help you if you can't do a little research. More than 40% reductions are a done deal then. Your next comment will be that Utah is different. You are correct, Utah has lower median wages than Sacramento and most of California and is even less capable of supporting stratospheric house prices.

I will agree with you on one thing. The lower the price of the house now, the less it will be reduced. High priced houses will lose value the most in nominal dollar terms. Instead of asking me to find a house listed previously at 1 million dollars for 600,000, I invite you to buy a million dollar house TODAY and let us all know when you sell it for 1.2 million.

getreal | 6:56 p.m. Feb. 24, 2008

One reason Phoenix is hurting is because they're still building like crazy and inventory keeps increasing. I've been there quite a bit lately. The best news in the RE market for existing property owners here this week is that new construction permits are down. There are going to be bumps and bruises in our market due to tighter lending standards, price appreciation and higher inventory than we've seen here for a while.

However, what most buyers on sideline don't realize is that inflation is raging and homes are not going to drop as much as they hope. Barring apocalypse; prices are going to appreciate over mid to long-term due to inflation! People use appreciation as a term but aren't we really talking inflation. Federal Government figures are baloney inflation is actually running more than 12% + percent annually. Look at food prices, construction materials, gas or services. Look at exponential appreciation/inflation of homes in Salt Lake area over last 5 years and tell me when the inflation is going to end? The devaluation trend for our dollar is strengthening--therefore push to shove cost of real estate is going to go up. Why? INFLATION

But... but.. Utah is different!! | 8:21 p.m. Feb. 24, 2008

Ha! this is great. Not many months ago they were saying it "won't happen in Utah" or "Utah is different" 10% price correction is the number I keep seeing pop up. I do expect to see more like a 30% state wide drop with the million dollar McMansions seeing the biggest drops. Those looking to buy WAIT. Tell everybody you know who is looking to buy to wait. Get the word out.

TOT | 8:42 p.m. Feb. 24, 2008

Oh my gosh! Real estate is a leveraged asset. The real estate market depends on debt to function. Inflation, if you mean prices going up (which is an incorrect definition), IS RAGING. Inflation is raging in the essentials like food and energy. Those input costs push up lots of other things as well, but the whole world is not competing over massage therapists in Utah. The whole world IS bidding on food and energy.

Most LEVERAGED assets, like real estate, are unraveling. How much would a 300,000 house cost if no one could get a loan? It's not that bad yet but we have seen a huge contraction in available credit(debt availability). Inflation can't rage in an asset class that depends on debt if credit is contracting.

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