Clyde Rhodes has a house he's trying to sell.
His tenants couldn't afford the rent and moved out. It's in West Jordan. Built in 1985. Five bedrooms, two-and-a-half baths, 2,800 square feet.
"I get an occasional visit, some offers -- ridiculously low. Nobody's serious at all," he says.
And now, Rhodes figures the house is worth $6,000 less than it was a month ago.
Gov. Jon Huntsman Jr. and lawmakers saw to that when they created the $10 million "Home Run" program, funneling federal stimulus money to 1,600 qualifying homebuyers. But there's a catch -- they have to buy new homes. Add on an $8,000 federal tax credit (matched by Ivory Homes) and some buyers can start with $22,000.
"Buyers aren't going to give your existing home a second look," says Rhodes. "Even if I reduce my price by $6,000, I can't give them cash. There's nothing I can do to compete. It's a huge kick in the back to anybody who's trying to sell their house."
"I'm subsidizing Clark Ivory."
The president of Ivory Homes gets both the cheers and the jeers for the home run. Privately, some call the legislation the "Clark Ivory Bailout Bill."
That's a little unfair. Of the 3,000 or so new homes sitting vacant in Utah, Ivory Homes is only responsible for 150. But as a member of the Housing Action Coalition that proposed the credit last fall, then solicited a University of Utah economist's study linking new home-buying to jump-starting the economy and finally lobbied lawmakers and the governor using that report, Ivory is the fall guy.
He'll take the heat if it means getting Utah's stagnant housing market moving again. Building permits are down 75 percent, from 20,000 two years ago to 5,500 last year. The last time housing starts were that low was in 1989. As a result, 16,000 to 18,000 construction workers have been laid off. And 2,000 real estate agents did not renew their membership in the Salt Lake Board of Realtors.
" Many builders are in a situation where they need to sell their existing inventory if they're going to start new construction," Ivory says. "It's these new starts that are going to put people back to work and get things going again."
The governor buys that logic. "In order for us to really get the economic stimulus necessary, you've got to move through the new homes," he says.
So a bias for new homes was institutionalized in government. While the federal tax credit applies to all homes, Utah's subsidy only benefits those who buy new.
It's not bad economics. Everyone acknowledges the role residential construction plays in the state's economy. Of the state's 1.3 million workers, just over 100,000 work in construction. And more than half of them build homes and condos and apartments. Without construction-related trickle-down spending, Utah's economy will continue to tank.
But some economists worry that this could be a short-term fix; that the "home run" will turn into a bunt: Government manipulation could artificially stimulate homebuying in 2009 only to strike out next year.
"We're probably borrowing from the future," acknowledges James Wood, director of the U.'s Bureau of Economic and Business Research. "What we don't know is how many people we're going to bring into the market that would not otherwise be in the market."
I understand all of this. And yet, as a the owner of a "1947 Sugar House charmer" that will be on the market soon, I'm irritated. It would be easy to blame homebuilders for their plight. In my mind, not much separates the giddy contractors of two years ago from Wall Street hotshots who got rich betting with other people's money.
At the same time, this state doesn't have the stockpiles of empty homes that California, Nevada or Arizona have. For the most part, Utah homebuilders were conservative. They were just overtaken by the subprime collapse in August, 2007, ending up stuck with homes they thought they had sold.
As Wood says: "The Utah economy needs this now."
So, I guess I'll be taking one for the team.
