National Expert Debunks Real Estate Worries
by Jamie Huish Stum
Good news for homeowners and developers: Utah’s real estate sectors are going to make it through the market softening just fine, according to national real estate expert Peter Linneman. Linneman was the keynote speaker at the NAI Utah Real Estate and Economic Summit Tuesday, which discussed the nation’s and the state’s economy.
“I don’t see any chance of a [national] recession in a coming year,” he said. “We don’t have supply that we can’t absorb.”
A widely-published economist, Linneman is the founding chair of the Wharton School of Business real estate department at the University of Pennsylvania and was also recently named one of the most 25 influential people in real estate by Realtor magazine.
Many buyers panic unnecessarily about the local residential real estate market when they see national media reporting a plummet in housing prices, Linneman said. While growth in Utah’s real estate market has slowed, standing inventory will be filled in the next six to 14 months. The U.S. economy is doing exactly what it should be doing, he said.
“All areas…are doing normal, except housing, which is doing less than normal, which is what it should be doing to get back on track,” Linneman said.
The real estate market is not booming as it was a few years ago, but it’s not crashing, Linneman said. Growth is down, but prices are fine, a common misunderstanding, Linneman said. Growth in the sector is slowing, which is a normal, necessary outcome after the spike of the past three years. Real estate continues to appreciate at a normal rate of 1.3 percent annually, which is a healthier, more sustainable pace than the country has previously experienced.
“The housing sector should be weak,” he said. “If the housing sector were still doing well, we’d be setting ourselves up for a bigger problem.”
Currently, 450,000 homes sit unoccupied across the nation, Linneman said. However, 25 percent are located in southern and central Florida and an additional 25 percent in Phoenix, Las Vegas and southern California. The rest are scattered fairly evenly across the United States.
“You know what that says about the rest of the housing market? It’s not in bad shape,” Linneman said. “That doesn’t mean there isn’t a little excess, but that excess gets used up in months, not years.”
Contrary to many reports, the national economy is still performing well, he said, and will continue to do so during the upcoming year. More than 89,000 new jobs were added nationally in August, according to Linneman. Looking beyond the data, Linneman said key indicators of a strong economy are airports, hotels and restaurants, all of which are bustling.
“People do not go on big holidays when the economy is in bad shape; you don’t send six employees to a conference when the economy is in bad shape,” he said.
Linneman predicted a slight recession in 2009 and 2010, largely due to the introduction of a new presidential administration, which will lead buyers to pause as they see what decisions the new president will make. He counseled commercial real estate developers to be cautious about how much speculation space they bring online in 2009 and 2010, because a recession could lead to less job growth and slower business expansion.
Utah’s economy also continues to experience growth, and the quality of life in the state is a key driver, said Jason Perry, executive director of the Governor’s Office of Economic Development, who also spoke at the event.
“By all key indicators, we have the hottest economy that exists right now,” Perry said.
According to a report from the Utah Department of Workforce Service released Tuesday, employment growth was 4.4 percent and 53,500 jobs were added during September in the state. Unemployment remains at a historic low of 2.7 percent.
“We are competitive with any state for bringing business into the state,” Perry said.
Because of this strong performance, Utah has been able to attract larger, more prestigious companies as possible move-ins. Perry mentioned a potential relocation deal with manufacturer Procter & Gamble, which would bring 1,300 jobs into the area.
“There is reason to be very optimistic about our future,” he said. “Things are happening here in the state of Utah.”
