Neal Hanks	Tom Tveidt

From Daily Planet Staff Reports

Despite government proclamations that the economy is recovering, no convincing evidence has been produced showing that better times are here now or are in the offing, local economic analyst Tom Tveidt said during a Leadership Asheville Forum on Sept. 15.

““We’re down a little over 7,000 jobs — it will take a while to flip that around. There’s really nothing I see on the horizon that’s going to turn things around quickly,” Tveidt said in a reference to area home sales. “It’s going to be a while.”

Ultimately, he said employment is the best way to measure an economic recovery locally.

Tveidt made his comments before an audience of about 60 people during LAF’s monthly Critical Issues Luncheon at the Buncombe County Board of Education offices. Tveidt is research director for the Asheville Area Chamber of Commerce.

Also addressing LAF was a Realtor, Neal Hanks, who noted that lower- and moderate-cost homes in the Asheville Metro Statistical Area are showing signs of stabilizing prices, while those costing about $500,000 are continuing to face challenges in selling. Hanks is the president of Beverly-Hanks & Associates, a large local real estate firm.

Tveidt and Hanks, who each spoke for 15 minutes, later fielded questions from the audience for 25 minutes.

Tveidt began by noting that the Asheville Metro Statistical Area “typically is very balanced.” After the last recession in 2001, the metro bounced back so quickly that, he admitted, “I got cocky” and declared publicly that Asheville is virtually recession-proof.

Tveidt said he has since regretted making that statement.

While in the past, the area’s health care industry has been able to make up for lost jobs in other sectors on a 1:1 basis, in July 2008 “we began to lose jobs ... We peaked at our job loss in March or April” of this year — and we’ve been narrowing that gap since then.”

 He noted the current area jobless rate is around 9 percent — third lowest among the state’s metro areas, but “still high” compared with historical levels. (The Asheville MSA, which includes four counties — Buncombe, Haywood, Henderson and Madison — has a population of 408,436, according to a July 1, 2008 estimated by the U.S. Census Bureau.)

The area’s big employment “drivers,” Tveidt said, are health care, manufacturing, tourism and in-migration (people moving into the area).

“This time around, those industries connected to consumers all got whacked at the same time,” he said. “We’ve edged our rate down — and now we’ve straightened.” To that end, Tveidt said there has been no job growth in the area for the first six months of the year as local employment has basically “straight-lined.”

When people ask him if the local economy has turned around, Tveidt said he answers with a definitive “No.”

He added, “The only things up are health care and government employment” in the metro. Across the U.S., he said “typically” the communities that have weathered the downturn best are those where employment is centered on health care and government. He said there are 377 other metro areas that also are showing no signs of a turnaround.

When “we see people getting hired and jobs coming back,” then “I’d say the recession has ended,” Tveidt said.

While government officials and some economists continue to declare the recession is over, Tveidt contended that that only might be the case if they are referring to a “technical recession” and is dependent on the definition because “I really can’t say I’ve seen any data that says anything to that effect locally.”

One of the least affected areas of the local economy, compared to elsewhere in this recession, are home appreciation rates, which, Tveidt said, have traditionally been positive in the area. “Home prices in the Asheville area haven’t taken the hit as elsewhere,” he noted. “On the real estate side, we’re actually sitting pretty well.”

Conversely, Tveidt told the LAF attendees that if they want to be frightened they should look at the level of building permits issued in the area this year. The permits are “way down,” he said, shaking his head and looking glum.

After a pause, he then asked, “So where are we going to go?”

In answering his own question, Tveidt said, “The brand ‘Asheville’ is still good ... Mainly, we lost temporary workers” in the recession.

“As for tourism, it can flip on a dime,” he said, meaning that if tourists surge into the area, the industry is capable of quickly hiring workers to meet the demand. The reverse is also true, he noted.

“Compared to other areas, like Savannah (Ga.) and Charleston (S.C.), which are down (in tourism) in double digits,” Asheville is doing much better — down “only in single digits,” Tveidt said.

In concluding, Tveidt said, “We’re up 900 workers in health care, but I’m not excited about that because I don’t think anybody’s going to put money into health care” until the national issue for reform is settled. Thus, he implied that continued growth in health care hiring is doubtful locally, at least in the short run.

On a final matter critical to the local economy, “in-migration declined” because of the severity of the downturn in housing in Florida and other major locales of people desiring to sell their homes and move to the Asheville metro, Tveidt said.

Meanwhile, Hanks said, “In midsummer, we started to see surprising growth in the (Asheville Metro) housing sector ... The key is better-than-expected.”

In August, Hanks said it was widely publicized that “we had the first month-over-month increase in unit sales in June in four years — since 2005.

Sales of new and existing homes were up. Of particular note, Hanks said, was a 9.6 percent jump in new homes sales in the Asheville area in July. That marks a 32 percent increase from the bottom in January 2009, Hanks noted, but the number still was way off from 2006, when new and existing home sales peaked.

For the last four months, home sales have increased steadily, but there remains lots of supply, Hanks noted.

“We still have a supply-and-demand issue that is very different than it was a couple of years ago,” he said, noting that it would take more than 20 months to absorb homes on the market last month at current sales rates.

He noted that real estate experts consider a market in balance when that figure is closer to six months.

“I’ve been asked about the first-time homebuyer effect.” It is major, he said. Indeed, sales of homes under $100,000 have increased 38.5 percent year-over-year, while those between $100,000 and $250,000 were up 8.7 percent. The higher categories showed decreases in sales, year-over-year.

“So,” Hanks said, “parts of the market are up and parts (higher-priced homes) are still challenged....

“I think you’re going to see some price concessions in the upper price ranges” because supply so dramatically offsets demand.
To emphasize the magnitude of the lower-end sales, Hanks noted that 94 percent of homes sales are for properties under $500,000 “and, really, most are under $400,000.”

Hanks then turns from discussing sales to focusing on price, noting that the latter had risen 2.9 percent from first to second quarter of this year, marking the first quarter-to-quarter increase in four years.

“It’s still too early to call this a turning point,” he said. “Supply and demand” in housing “are still out of whack.”

As for months of inventory, he said in 2006 it was 6.5 percent, in 2007, 10.3 percent; 2008, 13.8 percent and 2009 (through August), 20.2 percent.

“The question everyone is asking: Is now the time to buy?”

He said the answer includes consideration of two top factors in real estate — acquisition costs and financing costs.’

Since May of this year, interest rates have risen one-half percent. Many think this increase in interest rates will continue ... As a rule of thumb, every 1 percent in interest rate increases results in five percent fewer sales.

“Is this market getting better or worse?” Hanks asked. “Have we reached the bottom? The answer is, if you’re trying to buy a specific property or time the entire real estate market ... It is a great time (to buy real estate) — the best time to buy a house in my lifetime.” As for trying to time the real estate market, Hanks said, “I don’t know.”

The Realtor also noted that North Carolina has been picked as a top state for real estate recovery. “I think the future for our area is very strong for real estate,” Hanks said.

He then issued the following three forecasts and insights:

• Continued gradual improvement through 2010, with the usual seasonal adjustments.

• We think the prices are stabilizing in the lower and moderate price points. Still, some price challenges and softness in the higher ranges.

• “We’re in a very fundamentally sound marketplace.”