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Friday, December 02, 2005

"Bubble? The only answer right now is no."

At an "economic symposium" Wednesday, Washington's Employment Security Department chief economist Rick Kaglic explained his belief that the state economy is cruising along just dandily:

The local and national housing boom as well as The Boeing Co.'s recovery have finally kicked Washington's economy into high gear, according to the chief economist for the state's Employment Security Department.

Rick Kaglic told those gathered for an economic symposium Wednesday in Olympia that the state's economy "has been clicking on all cylinders" since last year.
I wonder what kind of cylinders "click." Maybe its a veiled reference to something not being quite right. Or maybe he's just mixing metaphors. Anyway, point taken—the state economy is doing well.
Although government and transportation hiring have done their part in the state's recovery, Kaglic named the construction trade and the housing boom as the real heroes in Washington's recovery.

While construction jobs represent a relatively modest 6 percent of all state jobs, they accounted for 20 percent of the payroll growth during the last year, he said.

"And the impact of the construction industry doesn't end with building homes," he said.

The booming housing market reverberates through the retail, insurance and – of course – real estate sectors as well.

"If you buy a home, you typically want to fill it with stuff," Kaglic said of the retail impact.

Kaglic linked the last four years of economic expansion to the refinancing of homes that pumped some $600 billion of equity into the national economy last year and the fact that "the retailers simply won't let us stop" spending.
So, Washington State's economy is in good shape, but a large portion of its improvement in the last few years has been a direct result of the real estate boom. 20% of new jobs directly attributable to housing, and who knows how many others due to increased retail sales thanks to the "housing ATM."
Kaglic and other housing experts at the symposium didn't think the Seattle-Tacoma area was experiencing a housing bubble that would pop any time soon.

In fact, Sam Anderson, executive officer of the Master Builders Association of King and Snohomish Counties, was blunt about the bubble.

"Are we in a housing bubble?" he asked. "The only answer right now is no."

Median housing prices – meaning half of all prices are higher, half lower – have climbed to the mid- and upper $300,000s in King and Snohomish counties and just under $250,000 in Pierce County. But Anderson didn't think the market would collapse.
So, if I'm understanding the logic here correctly, the state economy has housing (and low interest rates) to thank for a large part of its recovery, but we're not in a bubble, because state economists and homebuilders don't think we are. Mmm-kay.

(Barbara Clements, Tacoma News-Tribune, 12.01.2005)

9 comments:

ob said...

Well bubble or not...
Statewide housing inventory has been dropping since I started watching it last month. (not long I know)
NWMLS listings for WA have gone from 49073 on the 8th of Nov, to 47,114 today (2nd). (checked via http://www.windermere.com/index.cfm?fuseaction=listing.SearchPropertyMapv2&st=wa)

Now I know that a month is too short of a period to tell you anything. But if the bubble was bursting, (or deflating, de-foaming etc) wouldn’t we be seeing these inventories going up?

Anonymous said...

Based on what's been posted on ben jones' blog from various sources, it appears that in many markets there has been significant runups in inventory nationwide but some of that is coming off ( due to holiday and waiting til Spring I suppose). As for our neck of the woods, I would say we are still going to lag the country in feeling any downward pressure in housing price appreciation

Anonymous said...

Common, Tim. There are probably 3-4 dozen high-tech companies in Seattle with high-paying jobs. I understand there are points to be made in favor of real estate bubble, but don't be ridiculous.

The Tim said...

Pardon my ignorance, but which part of what I said do you consider to be ridiculous?

marin_explorer said...

The only answer right now is no.

Or, in other words: "truth be damned; full speed ahead!"
The govt. is prolonging the delusion because they're enjoying spending those taxes. Later, when deficits hit, they'll simply tell the public there was no way to predict a downturn.

People support bubbles when they think it helps their bottom line, but have the calculated the long-term fallout?

Anonymous said...

Pardon my ignorance, but which part of what I said do you consider to be ridiculous?
_________________________________

Your claim that large portion of WA economy boom is from real estate boom. There is certainly some of that, but the driver is high-tech industry in Seattle.

The Tim said...

Quoting from the article:

While construction jobs represent a relatively modest 6 percent of all state jobs, they accounted for 20 percent of the payroll growth during the last year, he said.

When a job sector that usually represents 6% of jobs accounts for 20% of the job growth, I'd say that is a large portion. I didn't say it was the driving force, or the majority, just a large portion. If you think that's "ridiculous," then oh well I guess.

Anonymous said...

When a job sector that usually represents 6% of jobs accounts for 20% of the job growth, I'd say that is a large portion. I didn't say it was the driving force, or the majority, just a large portion. If you think that's "ridiculous," then oh well I guess.
___________________________
The 20% number is bogus.

The Tim said...

The 20% number is bogus.

Unless you have some reference that backs up that claim, I'm going to believe the 20% number, and I stand by my assessment.