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Big picture economics and local real estate Real estate investors group Nashville August 10 2009 David A Penn Director Business and Economic Research Center Middle Tennessee State University dpenn mtsu edu 615 904 8571 Short term Outlook Upside The national economy is no longer in freefall Population growth continues in Middle Tennessee Murfreesboro experienced the 12th highest rate of population growth in the nation for 2007 08 Housing construction and home sales are on the rise buoyed by lower prices low mortgage rates 8 000 tax credit for first time buyers and mending consumer confidence Home construction and sales bottomed out in January Increasing housing activity will generate much needed state and local government revenue Inflation is not a problem and probably won t be an issue for some time Consumers can be brought back to spending when the right deal comes along The cash for clunkers program has been hugely successful and demonstrates that consumers will bite if the deal is attractive Downside Double digit declines in manufacturing employment have hit Tennessee hard Tennessee is more reliant on manufacturing compared with the average state Manufacturing decline particularly gruesome in the rural counties causing large increases in the unemployment rate In June 21 counties experienced unemployment rates of 15 or higher Unemployment rate still on the rise 11 1 for Tennessee 10 0 in metro areas 13 8 in rural areas June 2009 Unemployment is not expected to peak until next year Higher unemployment generates a large drag on consumer spending 1 What does recovery mean If recovery means a return to the status quo before the downturn then we have a very long way to go Research Insight estimates that Tennessee s economy will not experience a full recovery until 2014 We should consider a more modest definition of recovery a sustained improvement from last month or last quarter By this definition the local economy has begun the process to recovery but some sectors



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