Oddly enough, the historically proven surefire solution for correcting three major economic ills rarely shows up among the recommendations of reports, task forces, blue-ribbon panels and commissions with which the Puget Sound region is so enamored.
Those problems: High housing prices, rising energy costs and traffic congestion.
The solution: Wreck your economy.
Nothing takes the air out of a housing bubble like the pinprick of a recession. While the real estate devastation locally is nothing compared to locales like Las Vegas, it’s still no party. A guaranteed conversation-starter around these parts for years has been the anecdote of multiple offers above asking price minutes after a property is listed, or the outrageous purchase price for the fixer-upper with no view.
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These days, if people can stand to talk about such unpleasantness in mixed company at all, the conversation is likely to turn to homes that are selling tens of thousands of dollars below what they might have fetched five years ago – if they’re selling at all – and property values now upside down in relation to the mortgages attached to them.
When people weren’t marveling or griping about housing prices (depending on which side of the transaction they were on), they were griping about energy prices (since few people have their own oil refinery, hydro dam or gas well, there weren’t many around here feeling good about price spikes).
Nothing dampens the fire of roaring inflation in the energy sector like the cloudburst of recession. Oil prices that were climbing through triple digits in dollars per barrel have settled – albeit uneasily – at levels half as high. You hear little chatter these days about the daily changes on gas-station price signboards.
A major reason for energy-price deflation, especially for petroleum, is lack of demand, which is directly connected to the third regional issue, traffic congestion.
Nothing evaporates excess traffic from the roadway like the glaring sun of a recession. If people don’t have jobs to work at, they’re not driving to those jobs. There are still plenty of roadway segments in the Puget Sound region you don’t want to be on at certain times of the day (when someone jackknifes a semi on I-5 in the Fort Lewis area, for example, or when trying to drive from Renton to Bellevue on I-405 in morning rush hour). But there are also plenty of people who by now would happily trade the misery of unemployment for the frustration of traffic snarls.
So what can we expect for 2010 – especially if the long-awaited, oft-predicted economic rebound actually materializes?
Conventional wisdom has long held that the combination of natural constraints (water, mountains, not a lot of big parcels of developable land), manmade limitations in the form of land-use regulation and the desirability of living here inevitably make this a more expensive region for housing. That suggests that housing prices will resume their inexorable climb as the economy recovers.
Maybe so, particularly if another factor is thrown in: The reluctance or inability of banks to finance large-scale residential development, which in turns means less supply to meet increased demand.
But maybe not, if the recovery is no better than sluggish. Booms in Boeing and tech hiring have fueled previous housing booms. If neither sector is in expansion mode, the in-migration of new residents looking for homes will be dampened. Yeah, it’s a nice place to live and all that, but you can’t eat the scenery.
Predicting oil prices is a hazardous game, since so much of it is in places with a predilection for stirring up trouble (Iran, Nigeria, Venezuela) that makes petroleum buyers nervous and willing to pay more. Couple that with increased demand from increased economic activity, and long-term growth in China and India, and you’ve got the makings of a return to triple-digit oil prices.
But then … one mitigating factor might be the huge new finds of oil and natural gas resources. Natural gas is especially intriguing, because much of the new capacity is in our own backyard (Weyerhaeuser, for example, holds property in the middle of one of those finds). Greater supply of natural gas will not only meet greater demand for present applications of home heating and electricity generation but could spur its increased use as a vehicle fuel, while holding prices in check.
Traffic congestion will be one of the fast-reacting gauges to signal that an economic rebound is taking place. In fact it might worsen a lot faster than other indicators as people out of work for extended periods grab jobs farther from home than they would when employment opportunities are plentiful. That will put more cars on the road longer.
Which will at least give us all some new material to work with in our conversations. But if those topics don’t intrigue you and you worry about the problems of home prices, energy costs and traffic congestion, we could just keep our regional economy in a recession. As with a lot of strong medicines, the taste is thoroughly unpleasant and the side effects are nasty, but as recent experience demonstrates there’s not much arguing the effectiveness.
Bill Virgin’s column on business and economics appears Sunday in The News Tribune. He is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at email@example.com.