Sluggish housing starts in the nation`s interior may portend rough times ahead for the economy.
That`s the warning of a study by the U.S. League of Savings Institutions. ”We are not making out a case for an impending national economic disaster,” the study cautions.
However, it continues, without progress on reversing the slide in commodity prices and redressing the nation`s trade deficit, ”the economic afflictions of the Farm Belt, Oil Patch and Rust Belt will almost certainly spread east and west, not just to housing but to every sector of the economy.”
A preliminary copy of ”Regional Housing Starts: A Study in Economic Imbalance,” was released here last week at the league`s annual convention.
Because housing starts can be broken out geographically, they can ”serve as a proxy for regional economic activity,” according to the study by league economists James W. Christian, Mark H. Obrinsky and Mark W. Baumann.
The study also gives proof to the observation that the U.S. has developed a ”bicoastal economy,” in which the East and West Coasts prosper while the nation`s interior does not.
For example, single-family housing starts in the East-North-Central region–which takes in the five Midwestern states of Illinois, Indiana, Michigan, Ohio and Wisconsin–have hovered between about 22,400 and 25,000 a year since 1983.
In the six-state New England region, on the other hand, single-family housing starts have risen to an average annual rate of 17,995 units in the first three quarters of 1986 from 10,953 in 1983.
The story`s the same in the Middle Atlantic region, consisting of New Jersey, New York and Pennsylvania. Here, single-family starts have jumped to an annualized 35,644 units from 19,683 units three years ago.
At the opposite end of the country, in the California-Oregon-Washington state Pacific area, starts have jumped to 42,648 units a year currently from 34,848 in 1983.
However, in the economically depressed Energy Belt states of Arkansas, Louisiana, Oklahoma and Texas, single-family starts have plunged to an annualized 26,845 this year from 55,787 in 1983.
The study described the East-North-Central region as ”doubly afflicted with the problems of heavy industry and agriculture.
”Housing starts in this Rust Belt-Farm Belt region recovered only slightly with the onset of the national economy`s expansion in 1982 and have remained on a plateau well below levels of the late 1970s,” years when the region posted single-family starts as high as 54,873 units.
J. Dennis Montgomery, president of the Illinois League of Savings Institutions, agreed with the study`s findings.
”As you get outside of the Chicago area, you see the influence of the farm economy.” Montgomery said.
”There`s just no real recovery yet,” he said, citing the depressed farm implement industry and the falloff in rural lending. ”It will take time for the prices of agricultural commodities to recover.”
