Be prepared for the downturn to come

Be prepared for the downturn to come

Eric Sprink is not your typical bank president, so it was no surprise that Coastal Community Bank’s annual Fall Economic Forecast event was atypical in both content and style.

Normally such forecasts are delivered by professional economists. Sprink, who has been the bank’s president through a remarkable decade of growth, believes that business owners prefer a different approach.

“We are not economists, we are business owners. If we get it wrong, we lose money and potentially our business,” he said to a room full of customers and business owners as he delivered the bank’s forecast himself. “Economists can be wrong and they keep their jobs. We can’t.”

Sprink’s forecast for Snohomish County is a mix of optimism and caution. At a time when consumer and business confidence are high, he urges some restraint.

“Do not forget about the most recent recession, learn the lessons from it. History can be one of our greatest teachers,” he said, adding, “We very well may lack the imagination of what might cause the next recession, so you need to be prepared.”

The real estate market is hitting new highs again and that is causing Sprink and others some pause.

That last time the gap between wages and the cost of housing was this wide was 2007 and we all know what happened after that. Sprink’s forecast suggests business owners keep investing in the future “but hold enough cash to get through a down cycle if one comes our way.”

In a style uniquely his own, Sprink asked the audience to participate at his forecast events, polling them in small groups to identify what they think might trigger the next recession.

Answers varied from a change in Fed policy linked to the appointment of a new Fed Chair to military action overseas. Sprink suggests that it really doesn’t matter what triggers the next recession — his advice to business owners is to be prepared for one regardless.

“Don’t try to time the market, make sure your business plan is resilient for ups and the downs.”

A healthy real estate market should see prices rise about 3 percent per year on average, on pace with average wage growth.

After the re-setting of the market in 2008-09, real estate values have been increasing well above that level and prices now far surpass their highs from a decade ago while wages remain largely flat outside of the urban core of Seattle/Bellevue.

No one wants to have a repeat of the recession, but it’s also not healthy for the community to have the cost of housing out pace incomes by so much.

Business owners and real estate investors ought to pay close attention to tax reform as a result.

If wages get a boost from tax reform and can catch up a bit with housing costs, the real estate market will likely hold up while supply tries to catch up to demand.

Without tax reform, wages can’t keep supporting the increasing prices and an adjustment is likely to follow.

Tom Hoban is CEO of The Coast Group of Companies. Contact him at 425-339-3638, or or visit Twitter: @Tom_P_Hoban.

Talk to us

More in Herald Business Journal

Think Tank Cowork in Everett, Washington on July 19, 2022. (Kevin Clark / The Herald)
The first co-working space opens in downtown Everett

Think Tank Cowork’s owner hopes the facility will inspire other business owners to call Everett home.

New LGI Homes on Thursday, May 12, 2022 in Sultan, Washington. (Olivia Vanni / The Herald)
The real estate market took an abrupt turn this spring

Mortgage rates are up, but home inspections, seller concessions are back on the table for buyers.

The Lab@Arlington is a new one-stop shop for entrepreneurs and inventors located at 404 N. Olympic Ave. (Photo credit: TheLab@Arlington)
New Arlington business incubator opens

TheLab@Arlington is a new one-stop shop for entrepreneurs, inventors and business owners.

Patrons view the 787 exhibition Thursday morning at the Boeing Future of Flight Musuem at Paine Field on October 8, 2020. (Kevin Clark / The Herald)
Paine Field was county’s No. 1 tourist attraction. Not now

Snohomish County officials hope festivals and outdoor activities will fill Paine Field tourist gap.

Logo for news use featuring the municipality of Stanwood in Snohomish County, Washington. 220118
Stanwood Chamber of Commerce ‘can’t keep the doors open’

The chamber is set to shut down at the end of the month due to financial challenges.

Maria Rios, a ferry worker of 13 years, helps Frank and Fran Butler, both of Washington, D.C., check out as the couple purchases food on Thursday, July 21, 2022, aboard the MV Suquamish ferry between Mukilteo and Clinton, Washington. Rios said food service returned to the Suquamish about three weeks prior. (Ryan Berry / The Herald)
Drink up! Happy hour on the Mukilteo-Clinton ferry is back

More galleys are reopening as pandemic restrictions scale back. Get out of your car for concessions just like at the ballpark.

OnTrac Logistics has leased a building now under construction at Bay Wood Business Park on Everett's waterfront. The shipping company will open a facility there later this year that will employ 400 people. (Artist Rendering/Broderick Group.)
New Everett shipping facility to generate 400 jobs

OnTrac Logistics has leased a new building on the 12½-acre Baywood Business Park on Everett’s waterfront.

The Flying Heritage & Combat Armor Museum at Paine Field in Everett. (Janice Podsada / The Herald) 20220419
Flying Heritage Museum to reopen with new owner at Paine Field

Walmart heir Steuart Walton bought the historic aircraft and artifacts. The museum is set to reopen within the year.

Renee's Contemporary Clothing store at 2820 Colby Ave. on July 11, 2022. The iconic downtown Everett store is closing in August after 29 years in business. (Janice Podsada/The Herald)
Renee’s, another iconic downtown Everett store, is closing

After 29 years in business, the longstanding clothing shop will shutter. In-person sales slowed when stores reopened.

FILE - The logo for Boeing appears on a screen above a trading post on the floor of the New York Stock Exchange, Tuesday, July 13, 2021. Boeing is reporting a money-losing quarter as both its civilian-airplane division and the defense business are struggling. Boeing said Wednesday, April 27, 2022,  that it lost $1.24 billion in the first quarter and took large write-downs for several programs.  (AP Photo/Richard Drew, file)
Boeing sees best month for aircraft deliveries since 2019

The company delivered 51 passenger and cargo planes in June, its best month for deliveries in recent years.

The Alderwood Towne Center, a 105,000 square-foot strip mall, is located at 3105-3225 Alderwood Mall Blvd. The mall, which has been sold, is home to 20 businesses, including anchor tenants Marshalls and Michaels. Photo Credit: CBRE Group.
Lynnwood strip mall near Link Light Rail Station sold

Alderwood Towne Center, home to 20 businesses, could eventually be redeveloped to take advantage of light rail.

James Berntson shows how his farm uses a trellis system to control tomato plants on Tuesday, June 21, 2022, at Radicle Roots Farm in Snohomish, Washington. (Ryan Berry / The Herald)
Backyard business: Snohomish farm thrives on less than one acre.

James Berntson grew Radicle Roots Farm using smart crop planning and organic practices.