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2010: NO GUARANTEES!
Economists predict slow but steady return of building activity; some sectors to fare better than others
January 2010
“It will be a slow for the rest of 2010. Things will get better, but no sharp upward trend,” says Terry L. Clower, Center for Economic Development and Research at UNT- Denton. “
Roger Meiners, chair, Department of Economics, UT-Arlington, says “things will improve slowly… we’ve probably hit bottom…. [But] it doesn’t mean we are back to where we were before.”
M. Ray Perryman, Odessa economist, says 2010 will be transition year, but “I expect significant momentum to develop.” Meiners adds that growth could increase to 1% - 1.5%. “That’s piddly,” he says. “It will take a lot of years at that growth rate to dig (us) out of a hole.”
Angelos Angelou, Angelou Economics-Austin, says Texas economy to remain about the same. “I don’t expect 2010 to be more active, and that’s not good,” Angelou says. “Construction has to follow the rest of the economy, and I do not expect the national economy to create any new jobs before the first quarter of 2010. We would need to create 140,000 jobs nationally every month, to stabilize unemployment.”
Kenneth D. Simonson, chief economist, Associated General Contractors of America, says “Construction will hold up better in Texas than the rest of the country,” says Simonson. “Large military projects at Fort Bliss, Fort Hood and Fort Sam Houston will keep many contractors busy. Stimulus money will drive highway and school construction. But a declining tax base and unpaid taxes could deter some school districts from moving forward with new projects.
Angelou agrees. “Construction will continue unabated in communities with a military presence. Anything that relates to population growth in Texas, we will see that work continuing. The only sectors with economic growth are government, education and health care.”
Angelou predicts unprecedented growth in health care if national health reform passes. “Fifty million uninsured will begin to use the system,” Angelou says. “The road to recovery is through health-care reform.” Improved stock portfolios could put university and health-care projects back on track, Simonson adds. “In Texas, it also means wind-farm construction,” Simonson says. “Wind-farm construction will resume and there will be more transmission lines built “There are good deals for people in a position to begin construction projects,” he says. “Larger firms are doing deals where they will shave as much as they can because they want cash flow and they want to keep crews in place.”
Texas’ unemployment rate is 19th lowest in U.S. at around 8%, well below the national rate of about 10%. Simonson says office, warehouse and hotel markets will improve, and there is hope for retail. But private development will not move forward until credit markets loosen up.
“You have absolute craziness in the market; even companies with well-performing loans are having a hard time refinancing, Clower says. But he says that local and regional banks have started making loans. “Regional banks are important players in helping to promote what activity is out there,” Clower says.
“There’s an awful lot of unallocated office space, and it will take time to clear the inventory and for people to feel confident to put money in,” Meiners adds. “Housing starts will begin to build some momentum but will not approach previous peaks,” Perryman says. Prices have held up reasonably well, and foreclosure rates have remained steady in the state.”
Clower expects home construction to pick up in the second half of 2010. He anticipates mortgage rates will remain low amid reports that major builders have pulled back, so inventories are down. Meiners reports residential sales have picked up, but a large stock of unsold homes remain.
While most experts project slow growth in 2010, Clower cautioned that the country could experience a double-dip recession. He says employment must improve before the economy truly recovers.TB
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