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ECONOMIC
PREDICTIONS FOR 2000.
Regional real
estate economics that will influence
Whidbey Island in 2000 continue the
pattern established in 1989. For the
nation as a whole, the year will have
continued moderate growth, low
unemployment, high "productivity", low
inflation and fairly solid corporate
earnings. Corporate profits appear to have
topped out with price-earnings ratios at
historic highs. The stock market has
become extremely volatile! Mortgage and
other interest rates continue their
twenty-year decline. Mortgage rates rose
slightly during May and June of 1999 on
inflationary fears, but seem poised to
drop to seven percent - possibly even
lower. The banking and securities problems
that have affected Asia for the past
several years appear to be ending, except
for Japan with their unique problems.
Asians appear to be learning that
"democratically" elected governments do
not automatically bring the benefits of a
"free market" economy. Nothing in this
recent Asia situation is undeserved -
fraud, corruption and collusion in banking
and securities has caused their
difficulties. The solution for Asia, as
for other nation-states resides in "free
markets" (the "invisible hand" of Adam
Smith). If real reform is initiated, the
Pacific Northwest will generally be spared
a severe downturn despite our very high
reliance on Asian trade.
Meanwhile, the
entire Pacific Northwest, but especially
Washington state, continues to be "hot
property" for both business and real
estate. The Boeing Company is poised to
become one of the great economic engines
of the 21st-centry (beginning, as we all
know, after midnight on December 31, 2001,
not 2000!). Ask your stockbroker how much
cash Boeing is going to throw off
beginning about five years from now -
this, in a stock recently selling in the
low 40's. Real estate in most of Puget
Sound is selling at both record rates and
record prices. Seattle, Bellevue and
Redmond now (as of July 1, 1999) average
home prices near national
records.
The two flies
in this ointment? One, our Whidbey real
estate values have risen dramatically over
the past several years, forcing some who
would choose to live here, to be unable to
qualify for suitable housing. Second, the
world continues to be a dangerous place.
All human-kind is for the first time in
history vulnerable to events created
elsewhere but having world-wide
consequence. What happens in the Middle
East, let alone in Lebanon or Kosovo,
could dramatically and adversely affect
our well-being, our very safety, and the
health of our economy. Worse, "good news"
has very limited impact, whereas "bad
news" invokes our worst reactive
instincts.
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