Economist Hints at Recession; 
Springs Somewhat Insulated
Three months ago, local economist Fred Crowley warned of an economic slowdown in 2008, but he stopped short of forecasting a recession.
But rising unemployment, the Federal Reserve’s pledge of rate cuts and several weakening economic indicators mean the nation is on the brink, Crowley said Friday.
Crowley, a University of Colorado at Colorado Springs economist, delivered his sobering assessment to a meeting of about 100 members of the Pikes Peak Association of Realtors at the Crowne Plaza Hotel on the Springs’ south side.
Two other prominent local economists are split on the prospects of a recession. Tucker Hart Adams, a retired U.S. Bank economist and Colorado Springs resident, has been predicting a recession for more than a year. Dave Bamberger of Bamberger & Associates in the Springs said Friday that there’s a greater likelihood, but that he wants to see more data before reaching that conclusion.
Crowley’s revised forecast couldn’t have been good news for real estate agents, most of whom answered “average” or “below average” when Crowley started his talk by asking agents for a show of hands on how they rated today’s economy.
Still, Crowley’s talk wasn’t just bad news.
The effects of a recession in the Springs wouldn’t be as severe as the nation’s last economic downturn in 2001 - meaning fewer job losses and a quicker rebound than earlier in the decade, he said.
Crowley also told real estate agents that Colorado Springs’ housing downturn is reaching bottom and that the market is poised for a turnaround. If there’s a recession, Fort Carson’s growth and the strength of local defense contractors would help the housing market avoid backpedaling.
“There is something happening unique to us that is not happening nationwide,” Crowley said after his talk. “That’s the saving grace for us now.”
In his economic overview, Crowley walked real estate agents through a series of indicators that he said point to a coming recession.
An unemployment rate that climbed to a two-year high of 5 percent in December, a reduction in the percentage of the labor force that’s looking for work, a decline in durable goods orders, a leveling off of corporate profits and dwindling consumer confidence all are among telltale signs, he said.
“Does anyone think unemployment is going to remain at 5 percent?” Crowley asked the real estate agents. “I don’t.”
Another bad sign: Federal Reserve Chairman Ben Bernanke’s promise this week to cut interest rates to keep the country out of a recession. How can rate cuts signal a recession? Because the Fed often waits until it’s too late, and Bernanke’s pledge indicates a recession could be imminent, Crowley said.
Pocketbook issues also are hurting the economy, Crowley said. The nation’s mortgage crunch last year has made it tougher for homebuyers and commercial developers to qualify for loans; annualized inflation has surpassed 4 percent; and soaring gasoline prices mean consumers have less money to spend on clothes, appliances and other items.
But the Springs has a few things going for it, Crowley said.
Fort Carson’s growth would help, he added. Another 10,000 soldiers are coming to the post by 2010, although nobody knows for sure how many will arrive if a recession takes hold.
Tourism also could help the Springs if there’s a recession; a weaker dollar means it will be cheap for foreign visitors to vacation here, he said.
Also, the 2001 recession may have cushioned the Springs for another downturn; the area shed thousands of tech jobs during the last recession, and it doesn’t have too many more to lose, Crowley said.
Of the remaining tech workers, many are employed at defense contractors and likely will be insulated from a downturn, he said.
Crowley said a recession could cost the Springs about 9,000 jobs, or about 1,000 fewer than last time. If there’s a recession, he expects it would begin no later than the end of the first quarter and wind down by December or January 2009, he said. Economists define a recession as two consecutive quarters of declining U.S. economic output.
Recession talk aside, Crowley recapped a series of disappointing 2007 housing numbers for real estate agents. Construction of single-family homes, townhomes and condominiums fell from the previous year and foreclosures broke a 19-year-old record. Home sales of about 10,000 in 2007 were down from the past few years - although still a solid number, Crowley said.
But there are signs of a “bottoming out” of the housing slowdown, Crowley said. Over the last four months, the supply and demand for homes - measured by numbers of sales and households - is more balanced, he said. In addition, the slowdown in the pace of home construction isn’t as bad as it was a few months ago, he said.
Also, while median home prices reported by the Pikes Peak Association of Realtors have fallen over the past few months, a federal government report shows the area has gained steadily in housing appreciation.
The Office of Federal Housing Enterprise Oversight - which tracks repeat sales or refinancings of the same single-family properties priced at $417,000 or less - estimates values appreciated 1.6 percent in the Springs for the 12 months ending Sept. 30. Only Boulder and Grand Junction beat the Springs among major Colorado cities.
Over the last five years, the Springs also saw price appreciation of 4.2 percent a year, which outpaced every major Colorado city other than Grand Junction.
By Rich Laden
January 12, 2008
GAZETTE COLUMN
Stuart Scott is President of Stuart Scott Ltd, a Colorado Springs residential real estate company. He has been a licensed Colorado Realtor for 33 years.
Sheila Morris
Stuart Scott Ltd.
726 South Tejon Street
Colorado Springs, CO 80903
Office: 719.578.8801 x116
Fax: 719.578.8808
Cell: 719.290.0770
www.SheilaMorrisHomes.com
