Stephen Fuller: Local Economic Outlook Is Cloudy

Stephen Fuller, head of George Mason University's Center for Regional Analysis, is in demand these days.

Uncertainty surrounding the mortgage industry credit crisis has many business leaders turning to the professor of public policy for clarity on the future of the local economy. The problem is, Fuller says he can't confidently say when the housing slowdown that began in the first half of 2006 will end because it's unclear how deep credit problems will affect the region.

"We're not in a recession and it's not like [the savings and loan crisis], but there is no quick fix," Fuller said in an interview yesterday.

As we talked, Fuller was called by a local bank asking whether he would speak to its board of directors next month at the Tower Club. The bank wanted his take on the housing sector and local economic growth.

He said home sales will undoubtedly slow. Last year, 80,000 homes sold and this year Fuller expects 70,000 to 75,000 homes sales in the region.

There is already evidence that local government are being affected by the housing downturn, as counties like Fairfax feel a shortfall of tax revenues that were pouring in during the housing boom.

He expects unemployment to increase slightly which could mean less money for discretionary spending. If people spend less money, that will in turn affect economic growth.

"The reality is," he said, the region is five years into a business growth cycle that is "aging and maturing." The market inevitably is going to correct itself.

--Cecilia Kang

By Dan Beyers  |  August 29, 2007; 7:12 PM ET
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The past Federal Reserve easy money policies have come home to roost in the current real estate downturn, credit squeeze and stock market pullback. The historical solution has been to lower rates but this will further weaken an already falling dollar. Still the FED will lower rates regardless of the dollar weakness as real estate and the stock market are what is important to the FED.

Ron Holland, Author of "The Swiss Preserve Solution". He lives and sells real estate at Wolf Laurel Resort in NC.

Posted by: Ron Holland | August 30, 2007 8:58 AM

The problem is too much liquidity causing a churning of assets.Theres money to lend for subprime interest only mortages, money for leveraged buyouts and hostile takeoversand your credit card company will loan you money for anything at 20% interest.The ready availability of credit destroys dicipline. years ago you had to save up for a down payment if you wanted to buy a house, you had to save up for a "big ticket Item" People treat their credit card limit and the equity in their house as if it was money in the bank. well someday all those bills become due and it looks like its beginning too happen now

Posted by: Bob Yaes | August 30, 2007 2:06 PM

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