Sunday, December 28, 2008

A Tale of Two Cities

Yes, I've taken a bit of poetic license here since I'm referring to Newport (city) and Middletown (town). Different yet irrevocably tied by location.

Like most others- I've been keeping an eye on the economy. Foreclosures, business closings, investments gone bad- the list goes on. Although usually an optimist, I am not of the same ilk for the coming year. Talk about a long, hard slog. This is going to be it & that slog shows no end in sight with the IMF's chief economist warning of a second worldwide depression.

But let's think locally, so let me begin my tale. As the economy nationwide & locally was on fire, real estate investors flocked here causing prices to soar. I'm thinking of one local investor who purchased three handsful of multi-family propeties. You remember the thinking then- houses weren't just to live in- they were investments sure to return big $ on a relatively small investment with easy mortage monies available.

No docs, no $ down and the promise of huge returns. Heck, lenders were constantly in the pursuit of customers with local banks & investment houses only too eager to participate. No regulations? Who cared? We were on fire. Our local economy did well all-around. That is, if you don't count the poor and those working for minimum wage. Real wages stagnated for the middle class & their wholesale exodus from the area- who cared? Tourism, Navy, and a building boom. Life was sweet for many.

Then it all started to hit the fan. But don't just think real estate- it's an involved, worldwide, tangled economy after all. Think of the local hotels begging for temp immigrant employment visas which they had come to rely on. No-go. Think of the local ICE raids. Exit state left cheap help who worked hard for little, lived here, spent here, & paid taxes here. Think of the Navy brushing off its various buildings & selling them and the care of others to big business interests. So long local contractors working at prevailing wages. Hello, more housing on the market.

Throw in jobs all over the State being lost & replaced by ??? Then throw in investments gone South, healthcare insurance once again rising by double digits, and taxes (property) still rising.
Thank God the Navy still kept its base here & for our industrial center where many of them were house.

The investor with all those properties now upside-down mortgage-wise & waiting for the bankruptcy train to stop. Uh-oh. The bank wanted their $ and weren't willing to take one iota less. A real estate market glutted with more than a year's worth of properties on the market with prices dropping and multi-fam units with few or no buyers. A dead rental market. At least the car dealers are honest with their problems of no-customers.

Ironic. So many with no housing and there is a market glut. Notice the realtors down-sizing or just closing-down? Some local building contractors down for the count, long-time & even new businesses deep-sixed, and "sales" and "mark-downs" galore. That ain't good news, buddy. Hasn't made it yet to the local media? And it won't. We're all about promotion interspered by reports, notices, & personals. Hard times are only hinted at. No coverage for business closings, let alone the recent layoffs of a local contractor (60).

As my husband says, until you hear that tap-tapping of hammers once again for the building and rennovating market, you're just not going to see any recovery. And while Middletown & Newport are just beginning to find out what that means- lower tax revenues, businesses leaving, costs rising- this is just the beginning. The closest analogy that comes to my mind is the '73 Navy pullout. And we still had a small manufacturing base at that point in time. Lest you think it will not get that bad, remember the fed'l deficit & budgetary woes. What is one of our largest national expenditures (and local employer)- the military. Think that budget is sacrosanct? Middletown has been faring well locally due to hotel revenues (at Newport's expense). But how long will that last? Supposing the Lege decides to minus that from local aid? Uh-oh.

So all this national, state and local bad news doesn't effect you? Yet, that is. We counted on our politicans and bankers and investment houses to be smarter than ourselves. Silly us. Think that it's just a few naive, uneducated few causing our problems? Rethink it. No, I'm not optimistic for the coming year. And I hope that I'm wrong. Hey, buddy; can you spare $1.35 (allowing for inflation, don'tcha know)?
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