Economist: Q-C economy faring well

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By Doug Schorpp | Friday, March 7, 2008 12:45 PM CST | () comments

Quad-Citians liked what they heard from William Strauss about regional economic trends — especially what he had to say about the Quad-City economy.

Strauss, the senior economist and economic adviser for the Federal Reserve Bank of Chicago, was the guest speaker at Thursday’s Quad-Cities Economic Outlook program hosted in Rock Island by the Quad-Cities Chamber of Commerce Federation. About

300 people attended.

“I thought it was very informative and very accurate,” Brian Hollenback, executive director of Rock Island Economic Growth Corp., said of the presentation.

Strauss said the slow but steady growth of the local housing market in recent years is a good thing. While some people likely were unhappy that the market was not seeing the huge hikes in prices reported in other areas of the country in past years, they should now be glad. The slower growth means the Quad-City market is not now experiencing as hard a decline as many other metropolitan areas.

Strauss said the “real culprit” in the housing meltdown is those once-soaring house prices. “In the mid-’90s to 2006, home prices were rising faster than the rate of inflation,” he said.

He said whether or not the U.S. economy is in a recession may be a matter of semantics. Either way, the economy is soft in many areas. He believes “growth will be slow,” but nevertheless present as the year progresses.

Both Gene Holst, CEO of the Quad-City Area Realtor Association, and Dave Burrows, of the Quad-Cities Homebuilders Association, said the area home sales are doing well when compared with the national market.

Home prices locally have increased at a steady pace of between 4 and 4.5 percent annually in recent years, Holst said. Last year, the average sale price of a home in the Quad-Cities increased by about 3 percent, he added.

“Our inventory levels are good,” he said. “The market has about a 61/2-month inventory of new and existing homes, which is down slightly from a year ago. Now, all we have to do is assure that there is (mortgage) money available to those who qualify.”

The region’s homebuilders are still working, Burrows said. New housing starts in the market are off by about

35 percent from a peak in 2006, but none of the members of his group have gone out of business. That wasn’t the case during previous downturns in the construction industry.

“We had our home show last weekend and a lot of (builders) were optimistic based on what they heard from the people who came through,” he said.

Strauss, of the Fed,

suggested that the projected slow economic recovery can be reflected in the sale of new cars.

“Prior to 1999, we had never sold 16 million vehicles in a year,” he told the audience. But every year since, sales have stayed above that watermark, and in most cases with a gradual increase. However, last year showed the “slowest pace in 10 years” when the number dropped to 16.1 million. This year, it will drop to the high 15-million range.

Among the audience for Strauss’ presentation, Bill Polley, assistant professor of economics at Western Illinois University in Macomb, enjoyed the message. “It was a great speech, a great talk,” he said.

Deni McCarter, executive director of Genesis Occupational Health, agreed.

“I thought it was excellent. It reinforces the things I have been feeling that everything is not gloom and doom in the Quad-Cities ... that it is better than other areas of the country,” she said.

Hovey Tinsman, owner of Twin State Inc., which makes liquid fertilizer, said the agricultural boom has produced mixed blessings. While commodity prices have shot up, so have the cost of the ingredients that his company uses to make fertilizer. He has to compete with worldwide demand for the ingredients, especially against China and India, where booming economies have increased demand for more and better food.

Many of the ingredients are on “allocation,” meaning that access to supplies is limited and the amount of fertilizer his company is able to produce is constricted, he said.

(Reporter Tom Saul contributed to this story.)

Doug Schorpp can be contacted at (563) 383-2292 or dschorpp@qctimes.com.