VOL. 123 | NO. 235 | Tuesday, December 2, 2008
Economic Forum Gives Insight Into Local, Global Crisis
By Eric Smith
CENTER STAGE: Eric Barnes, publisher of The Daily News Publishing Co., led a forum today called "The Economic Crisis" at the FedEx Institute of Technology. The discussion centered on Memphis real estate, the mortgage meltdown and the impact on the local economy. -- PHOTO BY BRAD JOHNSON
In a down economy, it’s critical to tout one’s strengths, which is why David Waddell of Waddell & Associates Inc. suggested the following slogan for the Regional Chamber in its attempts to attract new business to the city: “Memphis is Cheap. Move Here.”
Waddell got plenty of laughs when he said that to about 180 people packed into the FedEx Institute of Technology today at a forum called “The Economic Crisis,” sponsored by the affiliated companies of The Daily News, The Memphis News and real estate information company Chandler Reports.
While cheap real estate might be one of the city’s advantages in recruiting companies as the national and global economies are suffering, however, it’s also wreaking havoc locally.
And attendees at the forum were reminded that Shelby County, like the rest of the country, has been in the midst of a housing crisis culled from a “perfect storm” of decreasing home sales, building permits and property values, and increasing foreclosures, bank sales and bankruptcies.
All told, those factors made 2008 a tumultuous year, to say the least, and landed Memphis in dire straits.
From the people who know
AUGUST GROUP: From left, Steven Baker, economist at FedEx, Dr. John Gnuschke, director of the Sparks Bureau of Business and Economic Research at the University of Memphis, and David Waddell of Waddell & Associates Inc., participated in a panel discussion today at a forum called "The Economic Crisis." -- PHOTO BY BRAD JOHNSON
The forum featured a distinguished panel that discussed Memphis real estate, the mortgage meltdown and the impact on the local economy. Waddell was joined on the panel by Dr. John Gnuschke, director of the Sparks Bureau of Business and Economic Research at the University of Memphis; Steven Baker, economist at FedEx; and Cleo Stevenson, former chief appraiser for First Tennessee Bank.
The forum opened with an introduction and overview from Peter Schutt, CEO of The Daily News Publishing Co., parent of the cosponsoring businesses.
He was followed by Daily News publisher Eric Barnes, who presented a detailed look at the real estate and foreclosure crisis in Memphis and Shelby County. His presentation focused heavily on the housing meltdown’s downward spiral, which derived from an onslaught of trends.
First, home sales in 2008 have declined 34 percent over the past four years, from 23,500 residential sales in 2005 to just 15,500 this year (estimated). Meanwhile, the home sales amounts have fallen 43 percent, from $3.7 billion in 2005 to $2.1 billion this year (estimated).
From 2005 to 2008, the number of home permits has declined 81 percent, from 5,000 to 1,000, and the dollar amount of home permits has declined 74 percent, from $873 million to $224 million.
Also, foreclosures have risen 68 percent in the past four years, while bank sales – as a result of the rampant foreclosure rate – have risen 71 percent and now account for more than 40 percent of home sales in Shelby County.
That said, Memphis has fared better in this slowdown compared to other cities, where wild appreciations have left their housing markets in complete disarray.
“While our story is doom and gloom,” Barnes said, “it is nowhere near as bad as it is elsewhere.”
Citizen of the world
Still, the problems in Memphis are mounting and evolving, especially as unemployment escalates. As job losses increase, it’s expected that foreclosures (not related to subprime loans) also will increase as will crime, meaning a clear resolution isn’t coming anytime soon, Gnuschke said.
“Those are big issues for the city,” he added.
Another big issue is the forthcoming reappraisal, which could create sticky situations because of foreclosure’s impact on property values.
As for recovery, no one seems to know when it will come or how quickly it will occur because the crisis is so widespread. But Baker pointed out that the housing market will need to show positive gains before the rest of the economy follows.
“Housing will need to stabilize before we see recovery,” Baker said, “because it’s on the minds of consumers and it’s where the crisis began.”
And, Waddell said, Memphis relies on the worldwide financial crisis for its full recovery.
“Until the economy gets moving again, I don’t think Memphis can get moving again,” Waddell said. “I don’t think Memphis can accelerate until the globe accelerates.”