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Local signs appear strong
Area economy holding steady, experts report
Herald Staff Writer
Economists gave local, state and national forecasts at the Southwest Business Forum 2009 held at the Fort Lewis College Community Concert Hall. The hall was nearly full, with hundreds of business and community leaders in attendance.
While local economic indicators look relatively stable, the national economy is encountering its deepest crisis since the Great Depression, the economists said.
In some good news for the local economy, natural resources and mining industries should add 3,000 new jobs statewide in 2009, said Richard Wobbekind, executive director of the Business Research Division at the University of Colorado-Boulder's Leeds School of Business.
Skiing should have a good year, he said. "We have long believed that good snow trumps a bad economy, and you have good snow," Wobbekind said.
In-town Durango received 42 inches of snow in December, nearly three times the historical average.
Drive-market tourism may benefit from low gas prices, he said. And Durango, with four breweries, is home to a growing industry. "The brewing industry continues to expand in Colorado," Wobbekind said.
Unemployment nationally sh-ould rise from 8.8 to 9 percent by the end of 2009, said Scott Anderson, senior economist and vice president at Wells Fargo Bank, which sponsored the forum.
In Colorado, 6.5 to 7 percent unemployment can be expected, Wobbekind said. La Plata County's unemployment rate reached 4 percent in November, according to the state Department of Labor and Employment.
For real estate, local single-family homes held their prices in 2008, and should hold steady in 2009, the economists said. Condos have experienced a deeper correction.
Durango is experiencing a much milder real-estate downturn than many cities, said Luke Miller, assistant professor of finance at Fort Lewis.
Houses sold for a median price of $392,500 in 2008, up from $389,500 in 2007, according to data Miller presented from The Wells Group, a Durango real-estate brokerage.
In the third quarter of 2008, the median sale price for homes in Durango slipped 14 percent, while dollar volume fell 23 percent, compared with the same period in 2007, according to the Durango Area Association of Realtors. The association has not yet published its year-end data.
Denver home prices dropped 5.2 percent in October, compared with the same month in 2007, according to the Case-Shiller Index. Boom-and-bust cities such as Phoenix and Las Vegas saw much steeper drops.
Building permits issued by the city of Durango and the county dropped 39.6 percent in 2008 from the previous year. Durango builders pulled back early, which should help the local industry emerge from the recession relatively quickly, Miller said.
In La Plata County, the gas and oil industry is operating at full capacity, Miller said. But the industry faces political uncertainty with the incoming Obama administration.
Bank deposits, an indicator of economic health, rose 6 percent in La Plata County from $1.03 billion in 2007 to nearly $1.1 billion in 2008.
Among agricultural indicators, alfalfa hay prices rose 18.5 percent in 2008, while calf prices declined 10.9 percent.
Although the local economy shows some reasons for optimism, the national outlook is almost uniformly bleak, Anderson said.
"I find it impossible to put lipstick on this pig," he said, citing a "fundamental lack of demand" reminiscent of the 1930s.
Anderson said the most optimistic economists predict the recession will last through the middle of 2009, while pessimists see the downturn continuing through 2010. The timing depends in part on the size and structure of President-elect Obama's expected stimulus package, he said.
The Federal Reserve has done all it can to reduce interest rates, Anderson said. Bank reserves have increased $765 billion since August, yet banks still are not lending.
American real estate lost $2.5 trillion in wealth since its peak in the third quarter of 2008, Anderson said. Homebuilders nationally have made little progress reducing excess inventory.
Mortgage debt doubled between 2001 and 2007. "We do have a mountain of debt out there, and it's going to take years to get out from under it," said Anderson, who predicted that 50 million households would be "underwater," or holding debt exceeding the value of the home.
Anderson's presentation was titled, "Plunging into the New Year."
Consumers, he said, are in "full retrenchment mode," while leading economic indicators look ugly.
"I don't see much in our economic tea leaves right now to give us a lot of hope," he said.
chuck@durangoherald.com
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