The value of residential construction in Utah reached an all-time high during the first six months of 2004, according to a report released Wednesday.
The University of Utah's Bureau of Economic and Business Research reported that the number of residential building permits increased 11.2 percent to 11,821 at a value of $1.7 billion in the first six months of 2004. During the first half of 2003, there were 10,633 permits authorized, at a value of $1.4 billion.
Residential valuations include the cost of materials and labor, not the cost of land or architectural fees.
The dramatic increases can be partly explained by the rising prices for construction materials like lumber and concrete, said the bureau's director, Jim Wood.
In terms of valuation, Wood said at this point in the year the state is on a record pace. The $1.7 billion is an all-time record. In terms of number of permits authorized, the first six months of 2004 ranked as the state's third-highest. Through the first six months, the only years exceeding 2004's results were 1996 and 1978, Wood said.
"Probably there is some anticipatory action here by builders as well as buyers," Wood said. "Builders see a lot of traffic in their existing product. They're trying to get their product, and even pre-sales, out there before interest rates go back up."
During the first half of the year, there were 8,573 single-family home construction permits authorized, according to the report. That compares to 7,893 permits authorized during the same period last year, and 7,036 in the first six months of 2002.
Dave Irwin, spokesman for Hamlet Homes, said Hamlet has more homes under construction this year than it has since the company was founded in 1995. Hamlet is the state's fifth largest homebuilder, specializing in planned neighborhoods in northern Utah.
"We've seen increases in homes under construction since last year, increases that are in line with the marketplace," Irwin said. Hamlet is "cautiously optimistic" about continued growth in the next year, he said.
Irwin attributed the industrywide growth to low interest rates, population growth and new household formation.
Also, he said, "As the metropolitan area has expanded, more and more areas are acceptable places to live. Areas south and west of the valley — like Herriman and Riverton — they're within reach of employment, have shopping and schools and amenities. Ten years ago, nobody wanted to live out there. But now, you have all of these things, all of the amenities, and these areas are seeing rapid growth."
Wood said the national employment figures for July, scheduled for release Friday, could have an effect on mortgage rates.
"If we come in with 280,000 new jobs in July, mortgage rates will bump up a little bit," he said, which likely will affect permit and valuation activity, as will any more-than-measured action on the part of the Federal Reserve to quell inflation.
"Builders and buyers are both reacting to what they expect will happen in the next several months," Wood said.
Non-residential construction permits also saw significant gains in the first half of 2004, according to the U. report. Commercial permits jumped 13.5 percent. The value of the permits topped $461 million.
"That's stronger than we thought," Wood said. Stronger still, he said, because the January-June figures do not include data for the $200 million hospital project planned in Murray. And strength in non-residential permit numbers suggests momentum building in the broader economy, Wood said.
"The non-residential construction side has been hurt much more than the residential side during the recession," he said. The increase in valuation indicates that businesses are "starting to work off inventory — that vacancy rates are starting to come down, office and retail vacancy rates. It means that people who want to invest are more optimistic, so they're willing to expand their business, or build a new site."
E-mail: jnii@desnews.com