Why Utah’s economy is soaring above its neighbours

The Mormon work ethic:

NOBODY knows quite how the contagion that broke out in Wall Street will affect the rest of America, nor how deep or how long the likely recession will be. What is certain is that some places will suffer more than others. So far Utah, a state best-known for Mormonism and pretty rocks, is looking unusually healthy. “We’ve got a lot to be proud of,” says Jon Huntsman, the governor. “Certainly more than many of our neighbours.”

Indeed, Utah has more to be proud of than any other state in the West. In September its unemployment rate was just 3.5%—less than half of California’s and the second-lowest rate in the region after oil- and gas-rich Wyoming. Last month the Milken Institute declared Provo, a sprawling settlement south of Salt Lake City, America’s best-performing city for technology output and job and wage growth. Salt Lake City itself came third.

Hardly a month goes by without Utah announcing a corporate relocation or a new factory. The state has experienced a minor semiconductor boom in part because of its cheap, coal-fired power. Ogden, until recently a decaying railway town north of Salt Lake City, has quietly become the world centre of winter sports equipment. Mike Dowse, who oversees brands such as Atomic and Salomon for Amer Sports, gives three reasons: “the mountains, the mayor and the money”.

The mountains are the Rockies, which lure young workers who like to go skiing. The mayor is Matthew Godfrey, a business-minded man who has aggressively recruited several companies to Ogden (Mr Huntsman, a former chemicals executive, likes to work the phones, too). The money, which comes partly from the city and partly from the state, is a mixture of relocation grants and tax breaks tied to the creation of well-paying jobs.

Utah’s housing market is relatively healthy, largely because it did not heat up too much in the middle of this decade. In August its foreclosure rate was lower than the national average. Nevada, Utah’s neighbour to the west, had America’s highest rate of foreclosure filings, according to Realtytrac. California had the second-highest rate and Arizona the third. Colorado’s front range, which includes Denver, is also littered with abandoned houses. Such areas have suffered from sharply falling property prices, reduced consumer spending and job losses among construction workers.

Another, hidden, source of strength is Utah’s strange demography. Mormons tend to start families young: the average Utah woman marries at just 22. That means the “echo boom”—the peak of childbearing by baby boomers—took place not around 1990, as in the rest of America, but ten years earlier. One reason unemployment is rising across the West is that a wave of teenagers is crashing onto the job market. Utah, by contrast, has few teenagers and lots of productive people in their late twenties and early thirties. “The timing is pretty good for a recession,” says Pam Perlich of the University of Utah.

The “cultural thing”, as businessmen from out of state delicately refer to Mormonism, helps in other ways. Utah’s almost universal conservatism makes for stable, consensual politics. It took the state legislature just two days last month to plug a $272m hole in the budget. By contrast, California’s budget was 85 days late. Nevada’s politicians are preparing for a nasty fiscal fight next year.

Mormons do not come to work nursing hangovers, and they are inclined to stay put in the promised land rather than pursue better-paying jobs elsewhere. Matthew Donthnier, who is hiring for a new Procter & Gamble plant, has only one complaint about the local workforce: it can be a little difficult to persuade people to toil on Sundays.

Oct 23rd 2008 SALT LAKE CITY
From The Economist print edition

If I Sell My Home, Will I Have to Pay Capital Gains Tax?

The IRS permits a maximum exclusion on capital gain of $250,000 for individuals and $500,000 for married couples filing a joint return who sell their home, but of course some conditions apply.

For the five-year timeframe prior to the date of the sale of your primary residence, you must meet the Ownership and Use Tests the IRS provides in Publication 523, Selling Your Home. These rules ensure you have owned the home for at least two years, and lived in the home for at least 24 months out of the last five years. Additionally, you may not have excluded a gain on your taxes from the sale of a different home within the last two years. Note that if you sell your property for less than your original purchase price, you cannot claim a capital loss.

A 'reduced maximum exclusion' can apply to those who must sell their home due to a change in their place of employment, health issues, or unforeseen circumstances that affect qualified individuals. In all cases, it is best to consult your tax professional or IRS guidelines if you have any questions about the taxes you may be responsible for if you sell your home.

Happy Thanksgiving

Happy Thanksgiving to everyone. This is the time to take a moment before the craziness of the Holidays set in. Enjoy your family and friends, make new acquaintances and nurture old ones. And if real estate is in your cards this Holiday season, I'll be here for you.

From me to you, Happy Thanksgiving!

SALT LAKE CITY UTAH MARKET? YOU BET

Home Prices: Now for the Good News

When the headlines about the housing market are apocalyptic, the last thing a homeowner wants to do is sell. But a funny thing happened to Jeff and Jennifer Boyd when they put their three-bedroom house in Philadelphia's Graduate Hospital district on the market this summer: They turned a profit. Just 45 days after the listing went up, a buyer snapped up the property for $555,000-$29,000 more than the Boyds paid in 2006. "We were pretty hesitant, knowing what the market is like," says Jeff. "But a few weeks later, it was gone."
Here's a surefire way to start an argument: Suggest that the housing market has reached bottom. To be sure, the near-term outlook is still grim, and nobody is forecasting a rapid nationwide rebound. But there are signs that the overbuilding and speculative pricing that inflated the bubble are working their way through the system. In October 2005, near the peak of the boom, the median sales price for a U.S. home reached 7.3 times per capita income; by this May it had fallen to 5.7, in line with historical norms. Nationally, the rate of decline in sales is slowing, and in some regions sales numbers have actually perked up. "The indicators are starting to look better," says Adam York, an economic analyst with Wachovia.

Why the disconnect? For starters, the national sales figures that get so much attention-and remain depressing-are brought down by boom-and-bust markets like Las Vegas, Miami and Phoenix. David Berson, chief economist with mortgage insurance firm The PMI Group, says that if hard-hit states like California, Arizona, Nevada and Florida are taken out of the statistical mix, the picture is much more promising. According to PMI's "risk index," which estimates the odds of prices falling in a given market, at least 65 percent of the nation's 386 metro areas have less than a 10 percent chance of seeing lower prices two years from now. What's more, the government's sweeping bailout of the financial sector could boost the housing market by making borthe rowing easier for buyers.
We dug into those numbers as well as other forecasts and analysis to determine which markets are in the best shape for a rebound. We also talked with housing experts to learn which kinds of neighborhoods and suburbs are thriving. Our search led us to 25 metropolitan areas that look particularly promising, and there are more than a few surprises. Here, we profile seven of the best-looking markets; for the full list of 25, see November's issue of SmartMoney magazine.

Salt Lake City
Salt Lake City supports a diverse economy that could be called “Mormons and more.” The Church of Jesus Christ of Latter-Day Saints remains a large employer here, but the area has also seen steady job gains in health care, education and natural resources. That diversity has offset tough times for local home builders and information technology companies, keeping job growth in positive territory–and putting a safety net under home prices. “There’s a very pro-business, pro-development atmosphere,” says Jeff Thredgold, the economist for regional Zions Bank.
The city’s downtown is a testament to that. The 40-square-block area buzzes with construction projects, many of them related to City Creek Center, a $1.5 billion development that will include retail stores, offices and condos. The downtown area is home to several of Salt Lake City’s hottest residential neighborhoods, along with the Utah Jazz NBA team, outdoor concerts, theater and nightlife (though you may have to join a private club to be served alcohol). Of the seven zip codes in Salt Lake County that saw median prices rise in the second quarter of this year, three were downtown locales.
This fall, Kolaleh Rahimi, 40, moved with her daughter into a historic 1934 home in the Avenues, a popular neighborhood with an eclectic mix of Victorians, bungalows and ranch homes just north of downtown. Rahimi, a pharmacy manager, bikes five minutes downtown for shopping, music festivals and the Saturday farmers’ market. “Whatever you can do in downtown New York these days, you can do in downtown Salt Lake,” she says. But there’s nothing New Yorkish about home prices: Three-bedroom houses in the Avenues sell for around $360,000.

By Brad Reagan and Elizabeth O'Brien
Oct 20th, 2008

Fed Cuts Rates

Global Banks Unite in Unprecedented Rate Cuts Ben Bernanke and the Fed brought financial aid to the streets, lowering the Federal Funds Rate and Discount Rate by 0.50%. In an unprecedented emergency move, central banks across the globe joined in lowering interest rates.
This move follows Washington's passing of the $700 billion Rescue Plan. From Wall Street to Main Street, a common concern has been heard by Washington. "We need money... no, let me rephrase that...we need cheap money."
Rates Could Rise From Here. Home loan rates have benefited from the weakness in the financial markets. Fixed rate mortgages remain very attractive. However, the Fed lowers short term interest rates to shore up financial markets. This could cause home loan rates to rise in the coming weeks and months if confidence returns to the stock markets.
ARM Holders Take Notice! Anyone that has an Adjustable Rate Mortgage (ARM), take note. The London Interbank Offered Rate (LIBOR) has soared from uncertainty in financial companies...And six million home loans in the United States are tied to LIBOR which determines the interest rate at the time of adjustment.
If you know someone with an ARM, let them know potential trouble lies ahead and the time to act is now. Information provided by Mike Yancey, Senior Loan Officer, SLC, Ut.

The Wall Street that shaped the financial world for two decades ended last night, when Goldman Sachs Group Inc. and Morgan Stanley concluded there is no future in remaining investment banks now that investors have determined the model is broken. The Federal Reserve's approval of their bid to become banks ends the ascendancy of the securities firms, 75 years after Congress separated them from deposit-taking lenders, and caps weeks of chaos that sent Lehman Brothers Holdings Inc. into bankruptcy and led to the rushed sale of Merrill Lynch & Co. to Bank of America Corp. ``The decision marks the end of Wall Street as we have known it,'' said William Isaac, a former chairman of the Federal Deposit Insurance Corp. ``It's too bad.''
Freddie Mac Chief Executive Officer Richard Syron stood before investors at New York's Palace Hotel in May last year lauding his company's ``cautious'' avoidance of the subprime-mortgage crisis. What Syron, who was ousted last week, didn't say was that Freddie Mac had been gorging on subprime and Alt-A debt. While it and the larger Fannie Mae bought the safest classes of the mortgage-loan pools, Freddie's purchases totaled $158 billion, or 13 percent, of all the securities created in 2006 and 2007, according to data from its regulator and Inside MBS & ABS, a Bethesda, Maryland-based newsletter used by Federal Reserve researchers. Fannie, which was also seized by the U.S. on Sept. 7, bought an additional 5 percent. The purchases by Freddie and Fannie helped fuel the boom in lending that led to frozen credit markets, more than $514 billion in bank losses and the collapse of two of the country's biggest securities firms. Expect rates and the market to be a little crazy for the next few weeks as investors adapt to these new changes. Content provided by Mike Yancey, Mortgage officer.

At the last minute the Fed decided to bail out AIG (American International Group) (the 18th largest corporation in the world), who also owns AG (American General a life company that itself formerly owned Wilmington Finance, and UG (United Guarantee) the Mortgage Insurance group. The Fed now owns 79.9% of the group. This morning, fixed income investors who typically move to buy MBS have been moving their sights to Treasuries this morning, in a flight to quality as MBS have really been negatively impacted by headlines such as Lehman, AIG MBS portfolios, etc, showing that the crisis is still here and very much alive. This is a great example of why you can't follow the 10 year anymore. The 10 year is down to 3.397 and mortgage rates are UP. Looks like MBS are showing signs of improvement so we will see how today pans out. Today the crystal ball is foggy. Currently we are off about a quarter in price from yesterdays last re-price, but still holding strong under the 6% mark for the 30yr fixed. Oil is currently up almost 3 bucks at 93.89 - Dow is down just over 243 points.
Lehman brothers is also in talks with some very aggressive investors about taking over part of their assets, therefore being able to still employee almost 6000 of their employees.

Expect the markets and news to be a little shaky these next few weeks as investors adapt to what is going on and eventually they will start to see the light at the end of the tunnel... This is a good thing!!! Information courtesy of: Mike Yancey/Loan Officer.