The Deseret News released an article last week regarding the Utah home construction market. Apparently, the number of building permits pulled fell 58.2% for the first quarter 2008 in comparison to the same period last year. The worst decline that Utah has ever seen. The article also describes the effects that these numbers are having on local building contractors. The steep drop off in demand is forcing many home builders to close their doors and seek employment elsewhere.
So obviously this isn’t great news for a lot of people. But quite honestly, for those who this impacts, this isn’t news at all. Contractors and construction laborers have been seeing the writing on the wall for the last 9-12 months. Utah’s residential construction sector was booming for long time and it was bound to cool off.
Naturally, this is having and will continue to have an impact on the local Utah real estate market. There is still an abundance of new homes that haven’t sold and an increasing number of spec homes going into foreclosure. Even though demand is increasing along the Wasatch Front, it will not be enough to curve the negative effects expected to hit home values throughout the rest of 2008 and well into 2009. Now before you kill the messenger consider the silver lining.
The market is correcting itself as it always does. First, far less new homes are being built which will contribute to the consumption of the existing inventory. Second, banks are seeking to regroup and they’re doing so by selling off foreclosed properties in bulk to private investors and conducting real estate auctions all across the country. And third, now lenders are dramatically reducing the number of future foreclosures by tightening their qualification standards now. Ultimately this will result in a much more stable real estate market and real estate values will rebound accordingly.
Realistically, sellers are the ones who will be impacted the most over the next 18-24 months. However, if they’re buying another home they’ll more than likely make up the difference as long as they stay for a couple of years.
If you’d like to read the article in the Deseret News click here.
