How does economic crisis affect us here in the Lowcountry?
The Hilton Head Island-Bluffton Chamber of Commerce recently held a forum on the topic.
The summary: The next few months are gonna be sluggish. Things will probably start looking up in mid-2009. And this region is in a much better position than some other places are.
The first presenter was Doug Woodward, an economist from the University of South Carolina’s Moore School of Business. He said things are the baddest he’s seen in 20 years, but we’ll likely rebound from the current mess because our U.S. economy remains strong, resilient and competitive.
A lot of people are looking back to the lessons learned in the Great Depression, according to Woodward, but we will not find easy solutions there. The Great Depression was a result of a fundamental liquidity problem, he said. The circumstances now are very different – and they are nothing like anything we’ve ever faced in our economic history. So when it comes to fixing the mess, we are kind of having to make it up as we go along.
Woodward is convinced that it’s going to take government investment to reverse the economic nosedive. He explained that the reason we need a federally-funded jump-start is that people are scared of spending their own money right now. It’s a predictable pattern of hoarding behavior, and when people are tight with cash it freezes the financial plumbing and things get worse.
But the only way government money can reverse the downward trend, according to Woodward, is if it is used for something meaningful. For example, it won’t be helpful to give each citizen $600 to blow on crap from China. Instead we need to think about making solid investments in the stuff that supports our nation’s production and distribution systems, like transportation networks and our electric grid.
Once the economy gets back on track, Woodward predicts that the Lowcountry will be one of the healthiest areas in the Southeast.
Dick Berger was happy to hear that, I’m sure. Berger represented the South Carolina’ Association of Realtors at the forum. Those guys really, really really want things to get moving.
There are tons of homes on the market and sellers are going down on their asking prices. That’s good news for buyers – housing is getting more affordable.
But those who have bought homes are having trouble keeping them. Berger said that 127 properties were currently up for foreclosure in Beaufort County.
To make matters worse, South Carolina has a new property tax system that squelches people’s interest in buying homes here. In broad strokes, long-time residents pay dirt cheap taxes and newcomers pay out the wazoo. Berger said that as a result of our unfair taxation polity, many second-home and retirement-home buyers are choosing properties in Georgia and North Carolina.
But things aren’t dire. There will probably be over $1 billion in property sold in Beaufort County in 2008, Berger estimated. Still, that’s 30% less than 2007.
Another presenter, Robert Dozier of Coastal States Bank, was cautiously optimistic. He said business is good and will get better, and the fact that the Chamber sponsored the forum was a good sign. Laughter rang out when he commented, “When we all come together to talk about it, we are close to a bottom!”
Dozier was formerly with the Federal Home Loan Bank of Atlanta, so he is intimately familiar with the state’s banking system. “The health of SC banks is strong,” Dozier said. “Most have a good amount of capital, and most have good underwriting standards. So they are in good shape to take advantage of the federal government’s Troubled Asset Relief Program.”
He recommended the banks use the TARP funds wisely. “We need to make sure we use it to set ourselves up so we are better off as a banking system than we are today,” he said.
Local banks have an important role in helping the economy turn around, according to Dozier. His bank is making available $50 million in jumbo loans at below-Wall-Street rates to give Lowcountry buyers better access to the great deals on high-end homes that are available right now.
Coastal States is also making loans that are different from the ones typical during the housing boom, he said, adding, “We closed on the first VA loan in Sea Pines in the last 12 years.” He also mentioned an upswing in FHA and rural housing loans.
The final presenter was a lifestyle and travel marketing expert, Rene Mack. Mr. Mack is based in New York City, where he works for PR giant Weber Shandwick.
The travel industry generates billions more each year than Detroit’s Big Three automakers, according to Mack, and is just as much a bastion of employment for the middle class. But he said that despite its importance to the U.S. economy, the travel industry lacks prestige and is not likely to be considered for a federal bailout.
Mack did have some good news. Because overseas travel is becoming so much more expensive, he said, the Lowcountry enjoys a distinct advantage because it is an easily accessible drive-market destination. “Right now you’re better off being Hilton Head Island than Hawaii.”
In terms of branding, Mack recommended that Hilton Head Island accentuate its authenticity rather than trying to spin itself into something that doesn’t exist. An emphasis on environmental awareness is key. “Look back to Sea Pines… a vision,” he said.
Advertising is an important, but according to Mack it is also essential to woo the travelers who are already familiar with the area with perks like free golf, or a waiving of pet fees at hotels.
“ We have a loyal base already,” he said. “Energize them. Make them brand advocates – destination evangelists. People are more apt to trust a neighbor or colleague or family than ads.”
The forum was a success because it was information-focused. The event could have become a vehicle for boosterism, or a doom-and-gloom pity party. But the Chamber, in its wisdom, recognized that the business community needed reliable, up-to-the-minute information from people who are tops in their field.
I’m looking forward to the next one. And hoping that there doesn’t need to be a next one.
Lowcountry Economic Outlook
How does economic crisis affect us here in the Lowcountry?