Times are hard, and Southwest Washington isn’t immune. But local experts said the area’s continued employment growth, global exports and resilient housing market will keep it strong while headed into an uncertain year nationally.
Still, the slowdown can’t be denied when looking at its source – residential real estate.
“If you look at what’s been supporting our economy over the last couple of years, a lot of it has been consumer spending that’s been possible by people refinancing their homes,” said Scott Bailey, regional labor economist with the Washington Employment Security Department. “If your home is worth less, you can extract less to spend.”
As financial market assets contract, he said, banks are making fewer loans with higher interest rates, which has slowed business expansion. Businesses, in turn, are buying less from manufacturers.
“You get multiplier impacts throughout the economy,” Bailey said.
The source
The local residential market is undoubtedly down, but some say it is just in the process of correcting itself after a boom.
While new sales activity in Clark County is up 11 percent since the beginning of the year, the average home sale price is down to $278,300, its average time on the market is up, inventory is up and pending sales are down, according to Mike Lamb, associate broker for Windermere Real Estate Stellar Group in Vancouver.
This is a buyer’s market, and buyers are beginning to figure that out, according to Lamb.
Bailey said the area still hasn’t seen the decline in home values that areas such as Michigan, San Diego and Miami have experienced.
The last time there was an annual increase in Clark County housing permits was in 2003, when they were up 9.6 percent annually, said Evelina Tainer, chief economist for the state ESD’s Labor and Economic Analysis Branch.
Since then, housing permit numbers have dropped consistently – most dramatically in 2006, when permit counts fell 20.7 percent, and in 2007 when they fell 21.4 percent.
“It’s one of those things that is very seasonal, but the trend is definitely down,” Tainer said.
In Cowlitz County, the story is nearly opposite. Housing permits dropped 27.7 percent in 2003 and had increases averaging 17 percent until 2007, when they dropped 14 percent. Housing permit data was not available for Skamania County.
But Bart Phillips, president of the Columbia River Economic Development Council, said the market is normalizing.
“The financial engineering going on around sub-prime loans is an interesting story, but it’s not about the local market,” he said. “The local market is back to normal, and we should be lucky that we are not Florida, Tucson or Phoenix.”
Commercial development has slowed, but current long-term projects are keeping it afloat, said Eric Hovee, principal of Vancouver-based E.D. Hovee and Co., a Vancouver-based economic research and development firm.
“The big unknown is how long that will continue,” he said.
Clark County employment continues to grow, but not at the speed of recent years.
In February, the county added 200 jobs and employment was up 1.9 percent over February 2007. But Clark County unemployment rose from 6.3 percent in January to 6.9 percent in February – higher than the national unemployment rate of 4.8 percent.
Statewide, Washington unemployment stayed unchanged at 4.5 percent in February.
In the last two years, Skamania County had an employment increase of 11.9 percent, thanks to increased manufacturing and tourism, Tainer said.
But February employment fell by nearly 1 percent from January and 2.2 percent from a year ago. Unemployment in the county rose from 8.5 percent in January to 9.3 percent in February. It was 8.6 percent a year ago.
And Cowlitz County saw a 1.3 percent employment increase in the last two years with slight increases reported for February. County unemployment also rose slightly from 7.9 percent in January to 8.1 percent in February. It was 7 percent a year ago.
Bailey predicts local employment will continue the same trend – growing, but at a slower rate – perhaps at 1.3 percent, still more than twice the national rate.
What does it mean?
Bailey said the rest of the year will be slow nationally, likely in a recession.
He defines a recession as two consecutive quarters of declining real gross domestic product – the value of all new goods and services produced within a time period.
Bailey expects slower employment growth, construction employment, commercial building and less retail hiring and retail expansion in the second half of the year.
The dollar will likely continue to depreciate, but Bailey, Phillips and Hovee agreed that could be in Southwest Washington’s favor in terms of exports.
“I don’t think the dollar is coming back any time soon,” Hovee said. “It will help our economy, especially in exports. If you’re a consumer, it’s a little painful, but if you’re a manufacturer of sophisticated goods, it’s an extraordinary opportunity. Companies throughout the region, from Boeing on down, are capitalizing on this.”
Phillips said the CREDC is seeing the same level of business activity in Southwest Washington as there was in 2007. As one sector, such as housing, has dropped off, others – renewable energy and global exports – pick up.
“We’re seeing companies move ahead with relocations to this area, and it could be a good year,” Phillips said. “We have some significant clients looking at this region for significant investments and expansions.”
Phillips declined to name those clients, but said business in the region remains active outside of housing.
“Would I want to be in the residential home sector? No,” he said. “I’d want to be in the technology sector – in any sector affected by exports, global markets. The weakening of the dollar is creating some opportunities there.”
Bailey said now is the time for business to get smarter before it gets bigger.
“When you have a child, you want it to grow bigger. At a certain point you don’t want it to get bigger, you want it to get smarter,” he said.
“What really increases our standard of living is being more efficient. If we’re doing the same thing but on a bigger scale, it’s going back to the teenager – it’s bigger, but is it smarter, more mature and ultimately a better steward of this world?”
Charity Thompson can be reached at cthompson@vbjusa.com.
