Monday Report
Salt Lake County Residential Defaults August 11th, 2008

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Salt Lake County Residential Defaults July 2007 to July 2008

3,584 Salt Lake County Homes Valued at over $932 Milion are in Default

ZIPCity# of DefaultsTotal Value of DefaultsAverage Default Value
84118Kearns 354$63,010,490 $177,996
84128East Magna270$26,342,570 $97,565
84065Herriman 247$80,207,690 $324,727
84120West Valley223$44,576,770 $199,896
84084West Jordan209$46,784,370 $223,849
84119West Valley180$32,780,470 $182,114
84088West Jordan165$42,886,990 $259,921
84020Draper 161$82,351,040$511,497
84044Magna 161$27,743,790 $172,322
84116NW Salt Lake128$22,467,590 $175,528
84095South Jordan117 $37,100,460$317,098
84121Cottonwood Heights107$53,023,370 $495,546
84092Sandy 104$46,802,390 $450,023
84104West Glendale104$14,591,200 $140,300
Not Listed104 $37,597,100$361,511
84094Sandy 98$23,321,000 $237,969
84106Millcreek 98$21,774,300 $222,187
84115South Salt Lake82$13,114,800 $159,937
84093Sandy 76$24,830,680 $326,719
84105Liberty Park71$21,965,200 $309,369
84070Sandy 61$12,954,100 $212,362
84107Murray 59$12,900,200 $218,647
84047Midvale 58$11,840,800 $204,152
84109East Millcreek53$17,305,000 $326,509
84103Avenues 52$25,658,800 $493,438
84117Holladay 48$26,427,140 $550,565
84123Taylorsville 48$11,809,300 $246,027
84108Foothill/St Mary's40$17,511,680 $437,792
84102University 38$9,792,390$257,694
84124East Millcreek36$16,802,500 $466,736
84111Central City 23 $3,717,000$161,609
84101Downtown 4$581,800 $145,450
84006West Jordan3$901,000 $300,333
84045South Jordan1$273,800 $273,800
84126Central City1$383,690 $383,690

Source: NewReach Builders Decision, August 2008

6 Areas Representing 508 Homes or 14% of the Total Average over $450,000

ZIPCity# of DefaultsTotal Value of DefaultsAverage Default Value
84117Holladay 48$26,427,140 $550,565
84020Draper 161$82,351,040 $511,497
84121Cottonwood Heights107 $53,023,370$495,546
84103Avenues 52$25,658,800 $493,438
84124East Millcreek36$16,802,500 $466,736
84092 Sandy104 $46,802,390$450,023

Source: NewReach Builders Decision, August 2008

10 Areas Representing 1,529 homes or 43% of the Total Average under $200,000!

ZIPCity# of DefaultsTotal Value of DefaultsAverage Default Value
84120West Valley223$44,576,770 $199,896
84119West Valley180$32,780,470 $182,114
84118Kearns 354$63,010,490$177,996
84116NW Salt Lake128$22,467,590 $175,528
84044Magna 161$27,743,790 $172,322
84111Central City23$3,717,000 $161,609
84115South Salt Lake82$13,114,800 $159,937
84101Downtown 4$581,800 $145,450
84104 West Glendale104 $14,591,200 $140,300
84128East Magna270$26,342,570 $97,565

Source: NewReach Builders Decision, August 2008

Upturn Thinking in a Downturn Year

Why it's important not to lose sight of long- term goals during a recession.

  • The collapse of the telecommunications market in the early 2000s was difficult for Lucent Technologies, the communications systems supplier that had been spun off from AT&T in 1996. In 2001, telephone service providers - a major customer group for Lucent - reduced their capital expenditures by 29 percent. To deal with this decline, Lucent's CEO, Henry Schacht, commenced a major restructuring program. Total head count was reduced from 106,000 to about 62,000 through restructuring, attrition, voluntary retirements, outsourcing, and the sale of businesses. Then in January 2002, Patricia Russo was named CEO, with a mandate for restoring the business to profitability. Most of the attention paid to Lucent, by insiders and outsiders, was still focused on the short term.
  • But not all of the attention. Within a few months of taking the position, Russo launched an initiative to identify new growth areas for Lucent. The objective was to start new businesses before the recovery was complete. These new businesses would make use of Lucent's core capabilities and provide a revenue and income stream that would be more stable and could grow even when the telecom hardware business was in decline.
  • The growth team conducted a short and intense study, drawing on an outside firm for help. This resulted in a proposal later in 2002 to create a new services business. Eventually named Lucent Worldwide Services (LWS), it was aimed at a diverse customer base and insulated from the business cycles of telecom infrastructure equipment. For the subsequent merger of Lucent Technologies with Alcatel, Lucent's services business was one of the compelling strategic rationales.
  • Nearly all industrial corporations are subject to business cycles. Lucent's story shows how important it can be to think about the next upturn even during a downturn.
  • At first, this seems counterintuitive; after all, in the midst of sales declines and the buildup of unplanned inventory and capacity, corporate leaders naturally turn to austerity measures and restructuring efforts to reduce capacity and control expenses. And these reflexive actions should be applauded. They have been responsible for the relatively shallow recessions of the past few years.
  • However, a mere recovery from crisis is not enough to deliver sustainable success. During World War II, for example, the famines of 1944 led some military planners to look ahead to the war's end and how they would help Europe rebuild its shattered farms and infrastructure - an effort that became the Marshall Plan. Similarly, the long-term success of companies may be determined not just by how well they handle a downturn, but also by their foresight in preparing for the upturn.
  • The upturn SWAT team that Lucent applied to create LWS is one successful technique for this. Another is a combined long-term and short-term planning process, which has been used effectively by Cummins Inc., the manufacturer of power generators and diesel engines for trucks, buses, and construction equipment. Cummins, based in Columbus, Ind., operates in a market that is accustomed to recurring business cycles. For example, truck owners tend to "pre-buy" their fleets just before stricter emissions regulations take effect, and the entire industry (engine makers, truck manufacturers, and truck operators) has become adept at flexing production capacity to match the expected heavy sales volumes.
  • At Cummins, this cyclical market had created a culture in which, as one executive put it, "We are really good at doing crisis." In 2001, after the September 11 terrorist attacks, and in the subsequent slowdown of the U.S. economy, the company decided to handle the crisis a little differently. The downturn was severe: Cummins suffered a net loss of US$2.66 per share and a revenue decline of nearly $1 billion from the previous year. The company's sales to the core heavy- duty truck segment fell by nearly 50 percent from their 1999 levels.
  • Cummins responded with a set of near- and long- term planning initiatives. It entered into supply agreements with key customers that were designed to moderate volume swings in future cycles. In addition, CEO Tim Solso put in place a set of strategic principles that focused the company on its core business and competencies, with the aim of minimizing the impact of future downturns. In 2005, the company further expanded its long-term planning by designing a strategy process that married best practices from all of its business units, and balanced the requirements for midterm cycle planning with prospecting for long-term growth opportunities.
  • This planning process has served the company well. In 2007, for example, Cummins faced the threat of another downturn due to another tightening of diesel emissions standards in the United States and the resulting impact on the market for trucks. Despite this challenge, the company was on track in December to report record revenues and earnings for the year, and the stock price was near an all-time high. Cummins is coming out of a difficult market in a position of strength, with numerous joint ventures in emerging countries, such as China and India, and new businesses in natural gas engines, marine engines, and alternative fuel technologies.
  • Some companies have managed downturns by building long-term thinking into their restructuring processes. A good example is Visteon, a manufacturer of vehicle components. Facing a North American automotive market in which sales are approaching 15-year lows, Visteon is streamlining operations; at least 30 production facilities will be fixed, sold, or closed before too long. But in the midst of this deep restructuring, the strategic planning process continues to focus Visteon's business units on growth opportunities as well. This process requires each business unit to forecast the size and growth of its underlying market, to identify differentiated products, and to make focused investments in key technologies.
  • At the corporate level, Visteon evaluates long-term economic and demographic "mega-trends" that will shape the transportation industry in the future, including consumer concerns about climate change. Accordingly, Visteon's climate product group has begun to emphasize development of alternative refrigerants that reduce greenhouse gas emissions. Another mega-trend is that traffic accidents are on their way to becoming the second-leading cause of preventable death; Visteon's electronics product group is developing driver information systems that improve awareness while minimizing distraction. Finally, the growth of the automotive industry in Asia has led to a strategic initiative aimed at effectively building business with the new automakers of that continent.
  • In these ways and others, while completing its turnaround, Visteon can maintain at least a partial focus on the longer-term prospects beyond the immediate crisis. If it does not plan for the nearly inevitable upturn in the automobile industry, Visteon will not realize the full benefit from the sweat and tears of its restructuring.
  • All industrial corporations face downturns and periods of retrenchment. Successful strategists promote upturn thinking even during the deepest downturns. Techniques such as crafting an upturn SWAT team, implementing long-term strategic planning, and requiring upturn thinking during restructuring help companies develop their own Marshall Plan to stay one step ahead of competitors when better times return.

    Source: Strategy + Business, 2008


Residential Defaults

  • Where are they?
  • How many?
  • Just the poor?
  • Just the rich?

Bob Springmeyer

Bonneville Research

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    Bonneville Research
    • Global Business Confidence
    • Global business sentiment remains weak and fragile. The survey results suggest that the global economy is skirting recession, but just barely. The U.S., European and Japanese economies are contracting according to the survey results, but the Asian economy continues to post growth that is near its potential. Businesses are notably worried about sales and their broad assessments of present conditions and the outlook into 2009 remain firmly negative. Pricing pressures continue to be very elevated, but have moderated a bit with the recent decline in energy and other commodity prices.
    • FOMC Meeting
    • As expected, the Federal Open Market Committee held the fed funds target rate steady at 2%. This is the second straight meeting with no change in the target rate. The committee's statement cited the weakening labor market and financial market stress. The statement also discussed high inflation; although the FOMC expects inflation to decline in the months ahead, the members said "the inflation outlook remains highly uncertain." The statement acknowledged both downside risks to growth and upside risks to inflation. This would indicate no near- term change in monetary policy. Dallas Fed President Richard Fisher voted against the action, preferring a rate increase.
    • Productivity and Costs
    • Friday's productivity and costs numbers came in worse than expected on the productivity side but better than expected on the cost side. On net, it is a positive report that augurs well for margins and stems inflation fears.
    • Wholesale Trade (MWTR)
    • Wholesale inventories rose by 1.1% in June, surpassing consensus expectations, following an upwardly revised 0.9% gain in May. Sales rose by 2.8% in June compared with an upwardly revised 2.2% rise in May. The inventory-to-sales ratio fell two- hundredths of a point from an unrevised 1.08 to 1.06 in June.
    • Construction Spending (C30)
    • Construction spending fell by 0.4% from May to June, a figure expected by most forecasts. For the first six months of 2008, construction spending was 5.4% below the total for the first six months of 2007. Most of the fall in spending from May to June was in private residential construction, though nonresidential construction also started to slow as a result of the economic downturn.
    • Factory Orders (M3)
    • New orders for factory goods rose 1.7% in June. The stronger than expected increase owed to a 2.5% increase in orders at nondurable manufacturers. Most of this increase occurred at petroleum refiners and chemical factories as commodity prices continue to boost nominal values. The news in the report regarding capital spending was also encouraging, although capital goods orders were revised slightly lower.
    • Semiconductor Billings
    • Global semiconductor sales rose 0.5% in June to $21.57 billion on a three-month moving average basis. If not for falling chip prices, sales would have grown at a double-digit pace. Sales are now 8% higher than in June of last year, with gains seen in all regions of the world.
    • Employment Situation
    • The economy lost fewer jobs than expected in July, but it is certainly not out of the woods. Payrolls fell by 51,000, while losses for the previous two months were revised downward. However, the unemployment rate, derived from the household survey, increased by 20 basis points, to 5.7%. Workers put in fewer hours in July as well, with further implications for income growth. Losses in goods-producing industries abated somewhat compared with June, but employment in service-providing industries declined. The economy lost fewer jobs than expected in July, but it is certainly not out of the woods. Payrolls fell by 51,000, while losses for the previous two months were revised downward. However, the unemployment rate, derived from the household survey, increased by 20 basis points, to 5.7%. Workers put in fewer hours in July as well, with further implications for income growth. Losses in goods-producing industries abated somewhat compared with June, but employment in service-providing industries declined.
    • Personal Income
    • Personal income inched up 0.1% in June after soaring 1.8% in May. Income growth was hurt by a reduction in the quantity of tax rebates counted as transfer income. Excluding the tax rebate effect, personal income rose 0.3% in June, up from 0.4% in May. Spending growth slipped to 0.6% from 0.8% the prior month. Real spending fell 0.2% as prices soared. The core PCE deflator rose 0.3%, the fastest since September, while the top-line deflator jumped 0.8%. The saving rate fell back to 2.5% from 4.9% in May but remained inflated by rebates.
    • Jobless Claims
    • Initial claims for unemployment insurance benefits increased 7,000 to 455,000 for the week ending August 2. Although expectations had been for claims to remain high, this figure exceeds them. A large portion of this is due to the extension of UI benefits, and thus does not necessarily suggest a severe loosening in the labor market.
    • Job Cuts
    • Job cut announcements have been trending higher in recent months and reached 103,312 in July. This is more than twice as many as a year ago. They have averaged 96,000 during the past three months. Transportation and financial services accounted for the highest number of cuts during the month and financial services led all others year to date.
    • Consumer Credit (G19)
    • Total consumer credit outstanding increased by $14.3 billion in June to a total of $2.586 trillion. This was the largest monthly increase so far this year. Both revolving and nonrevolving lines of credit increased at similar rates.
    • Pending Home Sales
    • The pending home sales index rose 5.3% in June to 89. The increase from May's downwardly revised number places the index just above its April high. The rise came as a surprise. The consensus had expected a month-ago decline of 0.5%. The rise in pending sales suggests that existing-home sales may have risen in July.
    • MBA Mortgage Applications Survey
    • The market composite indices finished up for the week ending August 1, as mortgage demand rallied for the first time in four weeks. The market index finished up by 2.8%. Most of the gain in the market index came from refinancing-the refinance index increased by 4.4%, but the purchase index also had a modest 1.8% gain for the week. Also, contract rates fell slightly.
    • Vehicle Sales - AutoData
    • July was an awful month for the U.S. vehicle industry. Vehicle sales fell to 12.5 million units on a seasonally adjusted annual basis, down from 13.6 million units in June, which was considered to be terrible. The last time sales were as low as they were in July was during the recession of the early 1990s. The main drag, of course, came from sales of SUVs, vans and pickup trucks, which fell sharply. Vehicle sales were off 13% in July from a year ago; light truck sales were 25% lower.
    • Chain Store Sales
    • Chain store sales rose 2.6% in July, in line with or slightly below expectations. Rising gasoline prices also played a role in the strength, lifting sales at warehouse clubs. Rebates continued to support sales. Discounters, particularly Wal-Mart, outperformed as financially pressed consumers focused on necessities and lower-priced goods.
    • Oil and Gas Inventories
    • Crude oil inventories rose by 1.7 million barrels for the week ending August 1, according to the Energy Information Administration, more than expectations of a 0.3 million barrel increase. Gasoline inventories fell sharply by 4.4 million barrels, far surpassing estimates of a 1.2 million barrel decline. Distillate supplies rose by 2.8 million barrels, surpassing expectations. Refinery operating capacity unexpectedly fell. Total domestic petroleum was unchanged. This mixed report is mildly bullish.
    • Natural Gas Storage Report
    • Working gas in underground storage rose by 56 billion cubic feet during the week ending August 1, slightly below consensus expectations of a 60 bcf increase. Inventories remained well below their year- ago level but only slightly below their five-year average for this time of year.

    • Golden Corral
    • Golden Corral Corp. trades as Golden Corral at 478 locations nationwide in 40 states.
    • The buffet family-style restaurants occupy spaces of 9,000 sq.ft. to 14,000 sq.ft. in freestanding locations.
    • Growth opportunities are sought nationwide during the coming 18 months.
    • Preferred cotenants include big box retailers.
    • For more information, contact
      • Gordon Poulsen,
      • Golden Corral Corp.,
      • 5151 Glenwood Avenue,
      • Raleigh, NC 27612;
      • Web site:

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    As some of you may know I am the Democratic Candidate for Utah Governor.

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