Salt Lake REALTOR® June 2008

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By Dave Anderton

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line of another magazine. “Buyer and s

Seller Beware,” warned yet another.
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As the national media focuses on what Ec ving The L F o
is wrong with America, Utah economist Jeff ono
Thredgold isn’t losing any sleep. mic Outlook
In fact, Thredgold, who runs his own consulting firm and
serves as an economic advisor to Zions Bank, believes the
negativity dominates the economic writing found in the
divide between the media’s take on the U.S. economy and
nation’s bookstores. Books focusing on the demise of
the actual fundamentals has never been greater. America’s
America; the coming debt crisis; the coming oil crisis;
economic opportunities, Thredgold maintains, abound as
and the imminent dominance of China, Europe, or India
much now as ever before.
are far too prevalent.”
“The national media has led millions of Ameri-
cans to believe that the economy is merely
limping along, creating few quality jobs, and
Utah ranked No. 2 in the nation
on the brink of disaster,” Thredgold writes in house-price appreciation in the
in his latest book, “EconAmerica: Why the
American Economy is Alive and Well. “Such fi rst quarter compared to year ago

12
 Salt Lake REALTOR® June 2008

In an interview with Salt Lake REALTOR®, Thredgold
continues to gush optimism toward the U.S. and Utah
economies despite soaring energy prices, a global credit
d crunch and lagging home sales.
ow S a
In addition, April’s sales compared to January are up 52
percent, according to the Wasatch Front Regional Mul-
tiple Listing Service. In 2007, during the same four-month
period in Salt Lake County, the up tick in sales was just 22
percent. In 2006, it was 38 percent.

For instance, Thredgold believes the national media

have done what he calls a “terrible disservice” Thredgold’s optimism is shared by Forbes magazine,
n le s

to the housing industry. “The national media which in April ranked Salt Lake City as one of 10
Tu

story is, ‘Why would you even think about “recession proof ” cities in the U.S. “Though Salt Lake
buying a house right now when you know City’s unemployment rate is rising, it’s still among the
rns

you can buy it cheaper in six months lowest of the country’s 50 largest cities,” the Forbes
or 12 months,’” he said. “In Las Vegas, article said. “A November 2007 report from the U.S.
d/Real E

Miami or San Diego that may be true, Conference of Mayors projected that Salt Lake City
S

but you can’t make blanket statements would be one of the few large cities in the country not
Toxic/W
t i ll

about the whole housing economy.”
Especially here in Salt Lake City, Thred-
gold said, which continues to outper-
form the troubled housing markets of Las
S
to suffer a decline in gross metropolitan product from
the mortgage crisis.”
And despite talk of a national recession, Utah is still cre-
ating new jobs at a rate of 2 percent, more than six times

Vegas, Los Angeles, Miami and Phoenix. the national job growth rate of 0.3 percent. In fact, at the
l

“Our prices didn’t run

i
o

up as high as California,
p
r

Arizona, Nevada and

p i

Our economy is three times the size of

s

Florida,” he said. “Those

e

were the sexy places to build

No. 2 Japan. It is four times the size of
n

and buy real estate because the

thinking used to be that there was No. 3 and No. 4 Germany and China
going to be no end to rising home
prices. Now, all four of those states are in
a recession.” end of the fourth quarter of 2007 the Wasatch Front had
roughly 35,000 unfilled jobs with an average pay of $13.10
And while Salt Lake County has also taken a hit in home
an hour, according to the Utah Department of Workforce
sales compared to last year, the Wasatch Front is doing great
Services. Many of those job vacancies included civil engi-
compared to other states, Thredgold said. In Las Vegas, for
neers, electricians, fire fighters and accounts clerks.
instance, home prices have fallen nearly 25 percent over
the past year. And Thredgold said home prices in Vegas But the good economic news does not mean Utah
could tank another 10 percent to 20 percent before hitting won’t escape the effects of a national housing downturn,
bottom. In contrast, the median home price in Salt Lake according to Nigel Swaby, a Salt Lake mortgage broker.
County dropped 6 percent between last year’s third and Swaby believes the worst is yet to come when it comes to
fourth quarters. Yet, between the fourth quarter of 2007 falling home sales and foreclosures.
and this year’s first quarter, the median price increased 2
“We are no where close to bottom,” Swaby said. “For the
percent. At 5.6 percent, Utah ranked No. 2 in the nation in
next year it’s going to be pretty bad. I don’t think people
house-price appreciation in the first quarter compared to
will get excited about real estate until there are significant
year ago, according to the U.S. Office of Federal Housing
discounts. We’re just not there yet.”
Enterprise Oversight.
13
Salt Lake REALTOR® June 2008
A fter five consecutive quarters of posting the
highest rates of house-price appreciation in the
nation, Utah fell to the No. 2 spot in this year’s first
quarter, according to a May report by the U.S. Office of
Federal Housing Enterprise Oversight.
For the three months ended March 30, Utah home prices
appreciated 5.58 percent compared to the first quarter of
2007. When compared to the fourth quarter of 2007, Utah
home prices declined slightly at 0.20 percent.
Wyoming saw the strongest house-price appreciation
of all states at 6.34 percent. California ranked dead
last, with home prices there dropping 10.58 percent.
Besides California, 14 other states (including Nevada,
Florida, Arizona and Michigan) saw home prices fall.
Three Utah cities made the top 20 list of 292 U.S. cities
showing the highest rates of appreciation. The Provo-Orem
area was No. 6 at 6.76 percent. Ogden-Clearfield was No.
9 at 6.64 percent. Logan ranked No. 15 at 6 percent. Salt
Lake City was No. 22 at 5.39 percent. St. George was No.
235, with home prices there dropping 3.65 percent.
Nationally, home prices were down 0.03 percent in the
first quarter compared to a year ago and down 0.23
percent compared to the fourth quarter of 2007.
James B. Lockhart, OFHEO director, said the national
price declines bring positive and negative news. “For
homeowners and financial market observers, these
declines spell further erosion in home equity levels
and potentially more trouble for mortgage markets,”
Lockhart said. “To prospective home buyers who have
been shut out of homeownership because of afford-
ability constraints, these declines may be welcome
news, as are continued low mortgage rates.”
Top 10 U.S. Cities With Highest
Rates of House Price Appreciation
Houma-Bayou Cane-Thibodaux, LA — 11.22%
Grand Junction, CO — 9.08%
Wenatchee, WA — 8.02%
Austin-Round Rock, TX — 7.74%
Billings, MT — 7.09%
Provo-Orem, UT — 6.76%
Anderson, SC — 6.73%
Mobile, AL — 6.64%
Ogden-Clearfield, UT — 6.64%
Hickory-Lenoir-Morganton, NC — 6.41%
14
Swaby, who produces his own real estate blog –
www.slcrealestate.blogspot.com – said the Utah housing
market has met its match. “It appears 100 percent financing
is the kryptonite of Utah’s housing market as well as the
other remaining strong markets like those in the Pacific
Northwest and North Carolina,” one recent posting men-
economists are
“dialing back dire forecasts.”
tioned. “Over time, buyers, sellers and lenders will adapt.
The high-flying easy lending of the past few years will prob-
ably never come back, but eventually things will even out.”
Historically, Swaby added, Utah has always been high in
foreclosures, bankruptcies and mortgage fraud. And he
agrees with a Pew Charitable Trust report issued earlier
this year which predicts that Utah foreclosures will jump
to 4 percent over the next two years. Currently, Utah’s
foreclosures are less than 1 percent, according to the
Mortgage Bankers Association. Nationally, the foreclo-
sure rate is roughly 2 percent.
Thredgold disagrees with the Pew projections when it
comes to future Utah foreclosures. But Thredgold is no
Pollyanna either. Utah’s housing market, he said, is strug-
gling. And nationally the housing market is in a recession,
but the problem remains a financing issue. In March,
Thredgold, who was part of a USA Today survey of 50
national economists, agreed with most of his colleagues
that the U.S. was in a recession or would enter one. But
after stronger than expected GDP growth in this year’s
first quarter and fewer than expected job losses, Thred-
gold changed his mind.
“The discussion now is that we probably are not going
to have a recession,” Thredgold said. “Almost everybody
expects growth to pick up in the second half of this year.
Global financial stress is impacting Salt Lake City real
estate mortgage lending. But in terms of the whole credit
issue, the worst is probably behind us. We’ve seen many of
the Wall Street banks and banks around the world write

off tens of billions of dollars in sub prime loans, but we’ve
also seen them attract capital from the Middle East and
raise their own capital.”
Thredgold’s view is backed up by U.S. Treasury Secretary
Henry Paulson, who in May said that the worst of the
nation’s credit crisis may have passed. And in a sign
that the national media may have overplayed reces-
sion fears, the Wall Street Journal reported in a May
14th front page story that economists are “dialing
back dire forecasts.”
“A funny thing happened to the economy on its
way to recession: It’s taken a detour,” the story said.
“That, at least, is the view of a growing number of
economists – including some who not long ago
were saying a recession was all but inevitable.”
Historically, Thredgold argues, U.S. economic growth
over the past 25 years has occurred with only a modest
period of economic decline. There have been two mild
recessions since World War II – one from 1990 to 1991
Salt Lake REALTOR® June 2008
and in 2000 to 2001. Yet the national media tells a consis-
tent story of demise and failure.
“Even when we’re adding jobs in the U.S. economy, the
national media basically says that they are jobs at Burger
King or McDonalds,” Thredgold said. “They say we are losing
The media drives negative news
when it’s negative and drives
positive news when it’s positive.
all of our good jobs and replacing them with crummy jobs.
That’s not true.” To make his case, Thredgold points out that
the U.S. continues to be the dominant player in seven key
industries: technology, telecommunications, transportation,
financial services, energy, entertainment and bio-medicine.
15
Salt Lake REALTOR® June 2008
“Our economy is three times the size of No. 2 Japan. It
is four times the size of No. 3 and No. 4 Germany and
China,” Thredgold said. “The national media says we
serve each other hamburgers and trade information with
each other, that we don’t make anything anymore. That
is wrong. U.S. production increases
every year. We produce more than
we ever have before. We just do it In Utah,
much more efficiently.” every sector is
Chuck Gates, assistant managing
editor of the Deseret News, believes
doing well
the recent spate of negative head-
lines and books is being driven by
the national presidential primaries, as candidates
have focused on the nation’s economic ails in
attempt to capture votes.
“It runs in cycles,” Gates said. “I think right now
we are in a negative cycle. The media works both
Top 10 Economic Myths
Perpetuated by the National Media
1. U.S. economic growth continues to be substandard.
2. We are losing our ability to “make things” in the
economy. We are rapidly approaching a time when
all we will do is serve each other hamburgers and
trade information with each other.
3. We have endured a “jobless recovery” in recent years.
4. We are losing high-paying jobs and replacing them
with low-paying jobs at Wal-Mart and burger joints.
5. We will be forever dependent on oil-rich nations.
6. Reducing the capital gains tax rate reduces tax rev-
enue… and vice versa.
7. We run a huge trade imbalance with the rest of the
world because we are not competitive.
8. Social Security will not be there for our children
and grandchildren.
9. As Americans, we have an insatiable appetite for
consumption… We save little for the future.
10. The stock market is overvalued.
Source: Jeff Thredgold
16
ways. When we’re telling everybody that it’s rosy out
there and there is nothing but great news nobody seems
to criticize us about that so why the criticism now? The
media drives negative news when it’s negative and drives
positive news when it’s positive.”
Gates added that it is the job of
the media to be skeptical. "Can we
become too negative? Sure," Gates
said. "But can government leaders,
real estate brokers and economists be
too glowing and too pos-
itive? Certainly. Go sit
down with a REALTOR®.
Manufacturing, Those people don’t have
surprisingly, is a negative bone in their
body. We, in the media,
doing well. maybe have too many
negative bones.”
Still, Thredgold believes
the media’s fascination with what’s wrong with the
economy clouds the real picture. For instance, the media’s
portrayal of a crashing housing market makes it appear
the entire economy is crumbling. However, Thredgold
said, new home construction represents only 4.5 percent
of real gross domestic product, which is currently valued
at roughly $15 trillion annually.
“In Utah, every sector is doing well,” Thredgold said.
“Manufacturing, surprisingly, is doing well. As the U.S.
economy loses manufacturing jobs every month we seem
to keep adding them. Construction is obviously weak
right now on the residential side, but the commercial
side is strong. We’re adding jobs in professional business
services, leisure and entertainment, health care and edu-
cation. There are 11 major employment sectors in Utah.
Until two months ago every sector was adding jobs. Today,
we have slightly fewer construction workers than we did a
year ago. We have slightly fewer in the information sector.
If we’re going to go through a national recession, we are in
pretty good shape here.”
Dave Anderton is the public relations director for the Salt Lake Board of
REALTORS®.