It’s looking like a long slog to get back to what the average family might call economic comfort.
The Federal Reserve issues periodic snapshots of the economy, and the latest for the Kansas City area and much of the Plains is a decidedly mixed bag.
The most hopeful news? “The residential real estate sector exhibited signs of stabilization,” the Kansas City Fed says, (adding in the next breath, “while commercial real estate conditions worsened”).
Although economists tell us growth seems to have taken root, at least three big problems still press on the economy. One is the high and worrisome rate of joblessness. The second is that just about everyone’s 401(k) had a near-death experience a year ago, although the stock markets – and therefore those 401(k)’s – have rebounded nicely in the last six months.
But there’s one more problem that preceded the other two: housing. Just as rapidly rising house prices for years convinced many that they were wealthier than their pay stubs might have suggested, falling prices have had the opposite effect.
The Fed says prices continue to fall, but houses are being bought and sold. It says the first-time home-buyer’s tax credit in the federal economic stimulus package has helped. That credit expires in a few weeks, and Congress is looking at a renewal. Banks and builders – including the Home Builders Association of Greater Kansas City – want it renewed and expanded to everyone buying a primary residence.
Is that a good idea? It’s a dilemma. It might keep the market tottering along, but at some point this is the sort of governmental policy that congeals into permanence. The government already uses the tax code to promote home ownership. This would permanently raise the cost of that policy.
Not to put too fine a point on it, but the Fed’s report says auto sales have fallen off again – just as soon as “Cash for Clunkers” ended. Housing might offer the same scenario, and a good deal more money is involved.
Other highlights of the Kansas City Fed report include expected gains in retail sales in the coming months, good corn and soybean crops this year, and that nagging deterioration in commercial real estate. Again, some good, some worrisome. What the average person would consider economic comfort will require a few more of those clouds to lift.
Read the report: The Federal Reserve Bank of Kansas City’s Web site is at www.kc.frb.org/
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