Is the economy in Utah going to get better anytime soon?
Probably not quickly enough to suit most folks. In Utah, in 2009, "We're still going to have more layoffs and more home price depreciation," said Mark Knold, chief economist with the Utah Department of Workforce Services.
Much of his prediction stems from timing. Utah's once-red-hot real estate market started to cool in summer 2007, about two years after other states' markets faltered. And Utah's economy didn't really fall into recession territory until a couple of months ago. At first, layoffs were contained largely in the home construction industry, but in recent months job losses have expanded to other sectors. As 2008 closed, Utah was losing jobs on a year-over-year basis, which isn't a good sign.
The one piece of good news is that at some point this year, local economists expect Utah's economy to bottom out. Housing sales, job growth -- "at some point they will stop getting worse," Knold said. "It will set the stage for the beginnings of a rebound in 2010. But keep your expectations in check. Even if a rebound comes, it will probably be pretty tepid."
With that in mind, here are some answers to personal finance questions Utahns might be asking themselves as they brace for the year ahead:
How worried should I be about my job? What are the prospects for getting another?
It depends on your industry. If you are working in sectors that are most affected by the economic downturn (read: anything tied to homebuilding and consumer spending, such as residential real estate, retail, manufacturing and hospitality/tourism), your job may be more vulnerable this year. Some workers already are seeing mandatory reductions in hours worked and could be facing layoffs. Workers in sectors that faced employee shortages in recent years or those fairly insulated from consumer spending -- such as those in engineering, machining, welding and health care -- should be insulated from the downturn.
What's likely to happen with mortgage rates? Should I refinance?
Home loan rates are low and there is little to suggest they will rise anytime soon. In fact, Wells Fargo & Co. economist Kelly Matthews believes rates probably will hover around 4.5 percent for a 30-year, fixed-rate loan for much of 2009.
"Once the stock market rebounds, mortgage rates will drift upward," he said. Many factors play into this, but generally, bad economic news is good for mortgage rates because when investors flee stocks and buy into bonds, mortgage rates fall.
Rates at their lowest levels in three decades have generated a refinancing boom. Whether you should refinance depends on several factors, chiefly your current interest rate. The general rule is to consider refinancing if you can lower your rate by at least 1 percent.
However, if you have an adjustable-rate loan, you may want to refinance into a lower-rate fixed loan, even if there is little reduction in your interest rate, said Evan Jones of Republic Mortgage in Salt Lake City. That's because, eventually, mortgage rates are expected to rise, and by getting out of an adjustable rate loan, you are locked in at a lower fixed rate.
If you have a second mortgage, especially one at a higher rate than your first, it sometimes makes sense to refinance and roll both into one loan, even if the difference in rates is less than 1 percent.
What's going to happen to the value of my home?
There probably will be more declines in the values of homes priced above $400,000, Matthews said.
If mortgage rates remain below 5 percent, values of homes priced at under $400,000 -- especially those below $300,000 -- may stabilize this year, he said.
But there's no guarantee. Salt Lake City real estate agent Randall Wall said that in recent weeks he has seen price concessions being made all the way down to the $150,000 range, although the lower the asking price, the less likely sellers are to take a hit to get their property sold.
Any number of factors can undermine the positive effects of low borrowing rates. Layoffs in Utah could accelerate and unemployment could escalate, or the nation's credit crisis could worsen. All could put negative pressure on home values.
Should I buy a home? Will I be able to sell my home?
Maybe, and maybe. Most people are worried about buying now, only to see the value of their home decline. Your best bet to avoid that is to buy in the $300,000-and-under range. If you buy above $400,000, you run a bigger risk. That said, some buyers are driving hard bargains today and locking in at super-low mortgage rates.
You will be able to sell if you price your property right, Realtors said, but that doesn't mean getting what you paid for it, what you owe on it or what you think it's worth. A real estate agent can provide a comparative market analysis of what your property is worth, compared with recent sales of similar homes. Or you can invest as much as $500 or more in an appraisal. Either way, the only way to get a home sold in a down market is to make it deal that at least one potential buyer can't pass up.
Is the rate on my credit card going up?
Some cardholders already have seen their rates increase. Although the federal government recently initiated regulations making it more difficult for card issuers to raise rates, they still can under many circumstances.
Credit card companies are more likely to raise the rates on cardholders who carry huge balances in relation to their credit limit, said Bill Hardekopf of the credit card-comparison Web site low.cards.com.
Others vulnerable to rate increases are those at or over their credit limits, who are late paying their bills or who miss a payment, or those whose overall credit record is getting worse.
"People with good or excellent credit, who pay their bills on time and who don't go near or over their credit limits aren't likely to face higher rates in 2009," Hardekopf said.
When will it ever be easier to get a loan?
The government has taken extraordinary steps designed to get banks to lend more readily, but most in the industry believe it's going to take awhile for the economy to get better, for banks to recover from losses and for credit to loosen.
Nationally, "The stage is set for credit to begin flowing, but whether that's going to happen in the first quarter, second quarter or later, no one really knows for sure," said Rob Brough, an executive vice president with Zions Bancorp. in Salt Lake City.
Brough said many potential borrowers believe it's difficult or even impossible to get loans these days, but he contends that is not true. The reality is, though, that the bar to qualify is certainly higher now for all types of loans. Some loans aren't going to be seen again anytime soon, such as the risky ones made to those with poor credit or low incomes that helped create the lending crisis in the first place. Buyers today generally must have more of a down payment when buying a car or a home, decent credit and more income to get a good rate or even get a loan at all.
Now, more than ever, it's important to get (and keep) your financial house in order. If you don't, you will pay more for credit, or not be granted it.
What's going to happen to the stock market?
Some are predicting a rebound as early as the middle of the year, others say the economy is in such bad shape that any sustained recovery isn't going to happen until 2010.
Barbara Walchli, manager of the Aquila Rocky Mountain Equity Fund, is among the optimists.
"We're due for some kind of a rally," she said, suggesting that many investors will wait to see how the business landscape looks after President -elect Barack Obama's inauguration on Jan. 20. "The growth in the money supply is huge and that is going to have to have some effect. There also is a lot of money waiting on the sidelines."
What's going to happen with gas prices?
Most experts agree the only direction gasoline prices can go is higher. "This is as low as gas prices are going to get," said Bob van der Valk, a state of Washington-based petroleum industry and fuel-pricing analyst.
The good news is that prices probably won't skyrocket, either. With the global economic downturn, consumers and businesses are using less gasoline. Less demand has translated into lower prices. The national unleaded average is around $1.70 per gallon, with expectations of about $2 a gallon early this year. But analyst van der Valk believes prices could rise as high as $3 this summer, with a yearlong average of around $2.50.
In Utah, after prices hit an all-time high of $4.22 in July, the average cost today is around $1.50. Utah tends to mirror the national average, although at times prices in the state can be substantially higher or lower.
