UTAH HOUSING MARKET2007

JAMES WOODBUREAU OF ECONOMIC AND BUSINESS RESEARCH

DAVID ECCLES SCHOOL OF BUSINESSUNIVERSITY OF UTAH

November 2007

RESIDENTIAL CONSTRUCTION PERMITS ISSUED IN UTAH: 2007 RETURN TO VOLATILITY?

0

5,000

10,000

15,000

20,000

25,000

30,000

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

Total Res. Units Single Family

DECLINE IN SINGLE FAMILY BUILDING PERMITS - 2007(Year-over January through August Comparison)

-760UTAH COUNTY

-177Kaysville

-137Clinton

-181Spanish Fork

-185West Valley

-190Herriman

-233Riverton

-267West Jordan

-268Draper

-585Lehi

-26WASHINGTON COUNTY

-140WEBER COUNTY

-577DAVIS COUNTY

-1,226SALT LAKE COUNTY

SINGLE FAMILY PERMITS ISSUED IN SEPTEMBERSource: Construction Monitor.

-62.6%4381,171Total

-36.4%82129Washington

-67.3%34105Davis

-70.3%124417Weber

-60.5%68172Utah

-62.6%130348Salt Lake

Percent Change

September2007

September2006

CHANGE IN UNOCCUPIED NEW HOMESSource: NewReach.

915

222

72

132

216

273

2nd Qtr 2006

134.3%2,144Total

70.3%378Washington

219.2%233Weber

178.8%368Davis

164.4%571Utah

116.5%594Salt Lake

% Chg.2ND Qtr 2007

CHANGE IN EXISTING HOME SALESSource: WFRMLS

-46.9%1,3912,619TOTAL

-48.4%204396WEBER

-39.7%237393DAVIS

-47.9%282539UTAH

-48.3%6681,291SALT LAKE

% CHG.SEPT2007

SEPT2006

LISTING FOR EXISTING HOMES FOR WASATCH FRONT COUNTIESSource: WFRMLS.

37.4%21,02516,507Total

3.8%2,3782,291Weber

41.2%4,9313,492Utah

28.4%10,8618,457Salt Lake

25.9%2,8552,267Davis

% Chg.20072006

PERMITS ISSUED FOR CONDOMINIUMS/TOWN HOME UNITS IN UTAHSource: Bureau of Economic and Business Research, University of Utah.

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

PERMITS ISSUED FOR NEW APARTMENT UNITS(January through August)Source: Bureau of Economic and Business Research, University of Utah.

679.4%26534Davis

31.3%1,161884Total

-84.9%16106Weber

-77.8%1463Washington

-100.0%04Wasatch

-23.9%284373Utah

0.0%00Tooele

0.0%00Summit

91.4%582304Salt Lake

% Chg.20072006

FIVE YEAR PERCENT INCREASE IN OFHEO INDEX FOR WESTERN STATESSource: OFHEO

50.8%U.S.

20.2%COLORADO

53.0%UTAH

57.0%NEW MEXICO

62.2%MONTANA

64.3%WYOMING

64.4%IDAHO

67.7%WASHINGTON

70.9%OREGON

89.5%NEVADA

90.1%CALIFORNIA

90.8%ARIZONA

MEDIAN SALES PRICE OF EXISTING HOME IN SALT LAKE METRO COMPARED TO U.S.National Association of Realtors

Salt Lake $233,100 U.S. $223,800

$0

$50,000

$100,000

$150,000

$200,000

$250,000

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

Salt Lake MSA U.S.

MEDIAN SALES PRICE OF EXISTING HOME IN WASATCH FRONT COUNTIES - 2007Source: WFRMLS

5.0%Total Jan.- Sept.

-2.5231,000September

0.0%237,000August

-1.3%237,000July

2.2%240,000June

2.1%234,850May

0.0%230,000April

4.5%230,000March

0.0%220,000February---220,000January

% Chg.Median Price

PERCENT CHANGE IN AVERAGE SALES PRICE OF HOME IN SALT LAKE COUNTY 1955-2007

-15%

-10%

-5%

0%

5%

10%

15%

20%

1955

1958

1961

1964

1967

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

PERCENT CHANGE IN OFHEO INDEX FOR UTAH

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006

Percent Change

THREATS TO OWNER OCCUPIED HOUSING

Extent of OverbuildingHousehold Growth Rates at 3%

Utah Demographics20 to 29 years olds

Possibility of National RecessionDemand Constrained by Lending GuidelinesSubprime Debacle

Vacancy Rate and Average Two BedroomTwo Bath Rent in Salt Lake County – 1997 to 2005 rents up 6%, bold.

(Source: Equimark)

6.5%$8245.10%2006

3.3%$8513.20%2007

1.6%

2.1%

-3.4%

-0.4%

2.4%

3.3%

0.1%

0.5%

6.6%

8.9%

% RentIncrease

$7746.50%2005

$7628.30%2004

$7469.90%2003

$77210.90%2002

$7757.10%2001

$7576.30%2000

$7337.70%1999

$7326.80%1998

$7285.30%1997

$6834.30%1996

Avg. Rent

Vacancy RateYear

IMMIGRATION AND DEMAND FOR AFFORDABLE RENTAL UNITS

Utah’s foreign born population is about 200,000; about 85,000 are estimated to be illegal.Each year the foreign born population grows by about 10,000 people and 2,500 households.PUMS shows that 57% rent or 1,425 of additional households.75% of these renter households are from Latin America and Africa.Assuming that these households are very low income the immigrant demand each year for affordable rental units is nearly 1,100 units.If high levels of overcrowding then demand might drop to500 units.

WHAT ABOUT LOW INCOME RENTERS?

Rental subsidy programs provide assistance for about 39,000 households: LIHTC (19,000), HUD (16,000), RD (1,500), Public Housing (2,500).

Estimated 103,000 VLI and ELI renters Estimated 65,000 VLI and ELI renters with no assistance; 7% of Utah Households

DETERIORATION OF AFFORDABILITY FOR MODERATE, LOW AND VERY LOW INCOME HOUSEHOLDS - 2007

Opportunity for Ownership Has DeclinedHousing Prices Unlikely to DeclineImmigrant Population Increase Demand for Affordable HousingLoss of Construction Jobs in 2008New Rental Housing Less Than 1% of InventoryRental Rates Increasing and Vacancy DecliningWorsening Crisis in Rental Housing

UTAH ECONOMY AND HOUSING

(1) DESPITE SINGLE-FAMILY TROUBLES UTAH’S ECONOMY IN STRONG EXPANSION.

(2) LIKELY SINGLE-FAMILY HOUSING HAS BEGUN SEVERE CONTRACTION.

(3) CONDOMINIUM/TOWN HOME STARTS WILL GAIN SHARE; UP TO 20% OF RESIDENTIAL.

(4) APARTMENT SHARE PROJECTED AT 10% OF RESIDENTIAL CONSTRUCTION; INVENTORY INCREASING BY <1%.

(5) MODERATE AND LOW INCOME AFFORDABILITY DECLINING; FEWER OWNERSHIP OPPORTUNTIES PLUS UNFAVORABLE RENTAL MARKET CONDITIONS.