“Who would have thought that high oil prices were good for you?” was the opening line renown economist Michael Parks used to catch an audience’s attention at a recent Puget Sound region economic forecast hosted by Frontier Bank.
Parks is owner and editor of the Marple’s Newsletter, a publication widely relied upon by Puget Sound-area businesses, bankers and investors in their forecasting. Many who attended were in the real estate end of investments, including developers, homebuilders and income-property owners.
“High oil prices hurt us at the pump,” Parks explained, “but have the effect of making Boeing’s new fuel-efficient generation of airplanes more attractive to customers, stimulating more sales.”
The higher oil prices also act to stimulate new business ventures into alternative energy. Some of those new ventures are homegrown or are choosing Washington as a good place to get started.
In addition to Boeing doing well, Parks forecasts other good news to continue in the business sector this year. “We are in the early stages of this aerospace cycle,” he said, suggesting a good run ahead of us.
So, where are the threats?
Parks pointed out a few. We are already in a long global boom that, this time, more than just the industrialized nations are enjoying. The United States is still the major driver of the world economy. Europe can’t and will not take up any slack if the United States slows as it often has in the past. Neither can Japan.
China is headed for slower growth itself, and India, the other country with over a billion people, still has too small of an economy to make a difference if the United States economy changes course for any reason. So any of these could create some slowing.
But Parks doesn’t see those as big threats. In fact, geopolitical risks are falling. Oil prices are settling. Capital spending by business is increasing; consumers still have money to spend; and while we are a nation that doesn’t save well, we have a record $11.4 trillion in homeowner equity, suggesting that we’re saving, but just in the form of equity in our homes. Compensation (wages, etc.) is increasing faster than inflation.
In Parks’ words, the U.S. economy is vibrant and represents the ultimate “hardened target,” having survived the largest single attack on U.S. soil on Sept. 11, 2001, and yet “here we stand today with this kind of a story.” That resiliency attracts investment and innovation, making the United States still the safest country in the world in which to invest and foretelling of a bright outlook for 2007 and into 2008.
Locally, Microsoft and Boeing are the right kind of horses for today’s race, creating good jobs with high-dollar multiplier effects that ripple through our local economy. The Port of Tacoma may soon do more volume than the Port of Seattle, making the two ports — with a sprinkle of smaller cargo in Everett — a major force in economic activity in the Puget Sound.
To use a baseball analogy, we are in about the third inning of a nine-inning game, with the balance of this decade shaping up pretty well in the real estate market, driven by demand created from job growth in an expanding business environment.
Tom Hoban is CEO of Coast Real Estate Services, a commercial sales, leasing, investment and property management company with offices in Everett, Tacoma, Spokane, and Boise, Idaho. He can be reached at 425-339-3638 or send e-mail to tomhoban@coastmgt.com.
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