Salt Lake REALTOR® June 2008

S E Why the Media
By Dave Anderton


Are Wrong About the Economy

he headlines are unavoidable. “Meltdown For Housing: Why The Worst Is Yet To Come,” screamed the cover story of a recent national magazine with a portrait of a red house melting into oblivion. “The Great American Slowdown” shouted the headline of another magazine. “Buyer and Seller Beware,” warned yet another. As the national media focuses on what is wrong with America, Utah economist Jeff Thredgold isn’t losing any sleep. In fact, Thredgold, who runs his own consulting firm and serves as an economic advisor to Zions Bank, believes the divide between the media’s take on the U.S. economy and the actual fundamentals has never been greater. America’s economic opportunities, Thredgold maintains, abound as much now as ever before. “The national media has led millions of Americans to believe that the economy is merely limping along, creating few quality jobs, and on the brink of disaster,” Thredgold writes in his latest book, “EconAmerica: Why the American Economy is Alive and Well. “Such

negativity dominates the economic writing found in the nation’s bookstores. Books focusing on the demise of America; the coming debt crisis; the coming oil crisis; and the imminent dominance of China, Europe, or India are far too prevalent.”

Utah ranked No. 2 in the nation in house-price appreciation in the fi rst quarter compared to year ago


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 crunch and lagging home sales. For instance, Thredgold believes the national media have done what he calls a “terrible disservice” to the housing industry. “The national media story is, ‘Why would you even think about buying a house right now when you know you can buy it cheaper in six months or 12 months,’” he said. “In Las Vegas, Miami or San Diego that may be true, but you can’t make blanket statements about the whole housing economy.” Especially here in Salt Lake City, Thredgold said, which continues to outperform the troubled housing markets of Las Vegas, Los Angeles, Miami and Phoenix. “Our prices didn’t run up as high as California, Arizona, Nevada and Florida,” he said. “Those were the sexy places to build and buy real estate because the thinking used to be that there was going to be no end to rising home prices. Now, all four of those states are in a recession.”

In addition, April’s sales compared to January are up 52 percent, according to the Wasatch Front Regional Multiple 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. Thredgold’s optimism is shared by Forbes magazine, which in April ranked Salt Lake City as one of 10 “recession proof ” cities in the U.S. “Though Salt Lake City’s unemployment rate is rising, it’s still among the lowest of the country’s 50 largest cities,” the Forbes article said. “A November 2007 report from the U.S. Conference of Mayors projected that Salt Lake City would be one of the few large cities in the country not to suffer a decline in gross metropolitan product from the mortgage crisis.” And despite talk of a national recession, Utah is still creating new jobs at a rate of 2 percent, more than six times the national job growth rate of 0.3 percent. In fact, at the

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
end of the fourth quarter of 2007 the Wasatch Front had roughly 35,000 unfilled jobs with an average pay of $13.10 an hour, according to the Utah Department of Workforce Services. Many of those job vacancies included civil engineers, electricians, fire fighters and accounts clerks. But the good economic news does not mean Utah won’t escape the effects of a national housing downturn, according to Nigel Swaby, a Salt Lake mortgage broker. Swaby believes the worst is yet to come when it comes to falling home sales and foreclosures. “We are no where close to bottom,” Swaby said. “For the next year it’s going to be pretty bad. I don’t think people will get excited about real estate until there are significant discounts. We’re just not there yet.”

And while Salt Lake County has also taken a hit in home sales compared to last year, the Wasatch Front is doing great compared to other states, Thredgold said. In Las Vegas, for instance, home prices have fallen nearly 25 percent over the past year. And Thredgold said home prices in Vegas could tank another 10 percent to 20 percent before hitting bottom. In contrast, the median home price in Salt Lake County dropped 6 percent between last year’s third and fourth quarters. Yet, between the fourth quarter of 2007 and this year’s first quarter, the median price increased 2 percent. At 5.6 percent, Utah ranked No. 2 in the nation in house-price appreciation in the first quarter compared to year ago, according to the U.S. Office of Federal Housing Enterprise Oversight.

Salt Lake REALTOR® June 2008 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 affordability constraints, these declines may be welcome news, as are continued low mortgage rates.”


Swaby, who produces his own real estate blog – – 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 probably 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 foreclosure 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 struggling. 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, Thredgold 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

Top 10 U.S. Cities With Highest Rates of House Price Appreciation
Houma-Bayou Cane-Thibodaux, LA — Grand Junction, CO — Wenatchee, WA — Austin-Round Rock, TX — Billings, MT — Provo-Orem, UT — Anderson, SC — Mobile, AL — Ogden-Clearfield, UT — Hickory-Lenoir-Morganton, NC —

11.22% 9.08% 8.02% 7.74% 7.09% 6.76% 6.73% 6.64% 6.64% 6.41%

Salt Lake REALTOR® June 2008

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 recession 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.”

and in 2000 to 2001. Yet the national media tells a consistent 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.

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

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.


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 much more efficiently.” Chuck Gates, assistant managing editor of the Deseret News, believes the recent spate of negative headlines 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.

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 positive? Certainly. Go sit down with a REALTOR®. Those people don’t have a negative bone in their body. We, in the media, maybe have too many negative bones.”

In Utah, every sector is doing well

“It runs in cycles,” Gates said. “I think right now we are in a negative cycle. The media works both

Manufacturing, surprisingly, is doing well.

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 revenue… 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

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 education. 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®.


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