At least one analyst says he views Utah's economy as half-full, while the rest of the nation is beginning to look half-empty.
During an interview with the Deseret Morning News on Tuesday at the Hilton Salt Lake City Center, Peter Linneman, professor of real estate, finance and public policy at the University of Pennsylvania Wharton School of Business, said Utah has the unique ability to maintain balance even during economic upheaval.
"The fact (Salt Lake City) is a state capital, it provides a 'leveling' phenomenon. You have the dynamic of the private sector and the stability of (state) government. So you don't go up as high as the (national) highs, but you also don't go down as low as the (nationwide) lows," Linneman said
He said because Utah did not experience the huge price run-ups in housing like Florida, California and Nevada, there shouldn't be a major economic correction. Linneman cited south Florida as an example, noting that during the previous 10 years buyers purchased 10,000 condo units total; today there are 40,000 new units under construction, and they are expected to be available in the next three years.
"You don't have to be a genius on supply and demand to say 'That doesn't work' and prices will fall a lot," said Linneman.
He predicts the Wasatch Front will see an increase in the housing market in early 2008 because the area "did not have a big excess" in homes, which he believes should bode well for next year.
Linneman said he expects prices in local commercial real estate to remain fairly flat and even decline in the coming year.
"You'll see on the commercial side there won't be a lot of transactions in the next year, so property values on commercial will go down a little bit," he said.
Nationally, he blames at least part of the current residential real estate downturn on poor judgment in home mortgage lending and people trying to make a quick buck.
"You have what I call 'idiots lending to idiots.' You had lenders who lent money to people with 5 percent down and no credit checks. That's not smart lending. And (there were) people who borrowed with only 5 percent down and not being able to lose that money to buy speculative homes. That was not smart either," said Linneman.
With that scenario in mind, Linneman said the market will begin to even out once buyers, sellers and lenders reach a point of equilibrium, with each side giving in a little and weeding out those in the market who don't belong.
The national commercial scene has a more positive outlook, according to Linneman.
"The commercial side is in quite good shape. The overpricing has largely disappeared in the last couple of months," he said.
Linneman expects the state as well as the rest of the country to experience a mild recession in 2009 following the presidential elections as people try to determine what impact the new administration will have on the economy.
"This is not a Democrat-Republican thing," Linneman said. "It always happens. And then you figure it out and move on from there."We always recover. We recover because we add people; we're a healthy economic system," he said.
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