The Housing Chronicles Blog: Could the states hit hardest by the housing downturn bounce back faster?

Wednesday, February 25, 2009

Could the states hit hardest by the housing downturn bounce back faster?

Here's an interesting theory: Luke Tilley, a senior economist with IHS Global Insight, thinks that the states hit hardest by the downturn in housing -- namely California, Arizona, Nevada and Florida -- could recover faster than states in the mid-west -- such as Michigan, Ohio, Illinois and Ohio -- which have lost manufacturing jobs that may never return. From a story at

In a twist of irony, the states hit hardest by the now-burst housing bubble could be among the earliest to recover from the devastating recession that resulted, outpacing the rest of the United States as soon as 2011.

“They’ve had a steeper decline, but they will have a stronger recovery,” predicted Luke Tilley, senior economist for IHS Global Insight’s U.S. regional service, in a recent online presentation. He was, of course, referring to the “housing states” of California, Arizona, Nevada, and Florida, which benefited mightily in terms of tax revenue, population growth, and new jobs during the boom...

The good news is that in terms of home prices, California and Florida may be reaching the bottom in terms of home prices in the first quarter of this year, according to Tilley. (Other regional economists have less rosy projections, particularly for Florida.) He anticipates that Arizona will reach its low point in 2009’s second quarter, followed by Nevada in the third quarter.

Unfortunately, the jobs situation—always a lagging indicator for the economy—won’t crater until later this year, at the earliest, according to Tilley’s analysis. Nevada will be the first to slide to the bottom, with an unemployment rate of (ouch) 10.1% in 2009’s third quarter. Tilley expects the other three housing states—California, Arizona, and Florida—to reach the bottom as far as jobs in 2010’s first quarter, with “trough” unemployment rates of 10.5%, 8.8%, and 9.5% respectively.

When employment does rebound, though, these states should be able restart their economic engines relatively quickly with their choice of workers. In contrast, manufacturing states such as Michigan, Indiana, Illinois, and Ohio may never recover the factory jobs they have lost during this recession, said Mike Lynch, an economist with IHS Global Insight’s U.S. regional service...


Anonymous said...

This is a very possible scenario, considering that prices here in South Florida have slowly begun to attract additional buyers and are at all time lows in many areas. Great and very informative post!

Anonymous said...

Such a possibility may not be all that far fetched. South Florida has seen prices tumble dramatically and buyer activity has begun to pick up, albeit not as rapidly as most would like.