Coming on the heels of Pattern for Progress' daylong conference on housing at Marist College and news that consumer confidence is ebbing in reverse proportion to rising fuel costs, Marist's School of Management released its "2007 liconomic Report of the Hudson Valley" June 21.

While dozens of statistics and graphs were included in the 129- page summary of the state of the Judson Valley, prepared by Christy Huebner Caridi, head of Marist's Bureau of liconomic Research in the School of Management, the importance of housing - its affordability, availability and ratio of income to mortgage payments - played a pivotal role in the report.

Joan Pagones, town of Fishkill supervisor who has been lauded for her municipality's pro-affordable housing stance, said at Pattern's conference, "There's a problem with the term 'affordable housing.' Everyone thinks of a tenement building in the South Bronx, instead of just housing that everyone can enjoy."

Marist's report bore out much of what Pattern's keynote speaker Hebert Yaro of the Manhattan-based Regional Plan Association told 300 attendees last month: The time has come for mid-Hudson communities to stop pulling up the drawbridge and start letting affordable housing into their communities.

WORK FORCE DEMOGRAPHICS SHIFT

Marist reported an overall reduction in the Hudson Valleys labor force, from 1,217,647 in 2006 to 1,203,650 in 2007. The 13,997- person decline was the first significant decrease since 1994; concomitant with the drop of the number of persons willing and able to work was a 12,587 (1.1 percent) reduction in the number of jobs.

The Putnam, Rockland and Westchester statistical area saw the largest increase of persons employed (11,300), while the cities of Kingston, Poughkeepsie, Newburgh and Middletown lost jobs.

While employment in the private service-providing sector grew, manufacturing jobs declined. According to the report, the region added three jobs in the private service sector for each manufacturing job lost but the average wage for one manufacturing job was equivalent to 1.62 jobs in the service- providing industry.

The highest-paid private sector jobs by industry were in management in fields like finance and insurance and technical services, with the majority located in Westchester, followed by Orange, Rockland and Dutchess. Westchester was the only county in the region with a concentration in these industries above the national average, while Dutchess was the only county with a concentration in manufacturing employment above the national average, the majority attributable to the presence of IBM's Fishkill and Poughkeepsie operations.

WHERE THE JOBS ARE

Westchester's job market had the highest rate of compensation for all industries included in the Marist study. In the management and enterprise category, Westchester led at $209,301; followed by Rockland ($99,564); Orange (84,516); Putnam ($74,567); Dutchess ($53,784); and Ulster ($46,388). Dutchess and Ulster also accounted for the greatest jump in five-year growth in this sector, by 22.63 percent and 22.11 percent respectively. Overall, the Hudson Valley experienced a 5.95 percent increase in net earnings in 2005-2006, while New York state fared a bit better at 6.50 percent, slightly more than the national average of 5.66 percent.

When it came to commuting, the number of Hudson Valley residents who worked outside of their resident county increased by 8,900, from 287,000 in 2005 to 296,000 in 2006. Across the region, the percentage of residents willing and able to work in the labor force who were employed outside their home county ranged from a high of 55.42 percent in Putnam to a low of 15.93 percent in Westchester. (The Westchester figure was not broken down by municipality, where the out-of-county work force along the Harlem, New Haven and Hudson train lines with their crammed New York City-bound a.m. platforms would seem to indicate a higher number.) These figures were compiled from data provided by the state Department of Labor.

HOUSE RICH, CASH POOR

Each county in the region recorded both a year-to-year and quarter-to-quarter decline in home sales, with Orange at the highest (down 12.25 per cent) and Westchester seeing the least decline (down 3.37 percent) from 2006 to 2007. Comparing the first quarter of 2007 with the first quarter of 2008, the largest declines occurred in Rockland (down 36.47 percent) and Orange (down 33.20 percent).

But the average 2007 selling price of an existing home in the Hudson Valley rose 5.73 percent relative to 2006. During the same time frame, the average selling price of an existing home in the state declined 3.16 percent.

By year-end 2007, the average selling price in the valley was 126.0 percent above the national average and 73.4 percent above the state average. Home prices in Dutchess, Orange, Putnam and Rockland exceeded both state and national averages, with Westchester far above that number.

Across the Hudson Valley, new construction spending declined 15.51 percent, from $986 million in 2007 to $873 million in 2007.

THE '30 PERCENT RULE' IS OUT THE WINDOW

The Marist study reveals between 2002 and 2006 the percentage increase in average housing values in the Hudson Valley increased 16.06 percent relative to the increase in per-capita income. The data state that, in the long run, housing values display a stable relationship with income, employment and population growth. However, in the short run, housing values can and do de-link from economic fundamentals. The report states the causative factors in the current economy began in the 1999-2000 period with a portfolio shift away from financial assets toward real estate, coupled with financial deregulation and "accommodating monetary policy" (low interest rates). Taken together, these factors produced an increase in demand funded by cheap money and innovative finance. The consequence for the regional economy has been an increase in housing inflation that has substantially outpaced the increase in income and population growth.

Guesstimates by local Realtors in all counties concede the roof over the average home is probably worth what it was in 2002-2003, an inflationary time when New York City residents moving north because of the post-9/11 fear factor pushed the prices higher than would have occurred through natural progression in the marketplace. And those who sold in the "boom time" got substantially more than their homes were actually worth. The subsequent "washout economy" has eliminated the net benefit for many. As a direct result, for those brokers who are still in business, lending rules are so tight they might as well be trying to lead buyers without Rockefeller-like credit through the eye of a needle. Community banks have mortgage money to lend, but have stuck to their traditional guns; while money is available, financial institutions want to know they have a "stable buyer" knocking at the door and many do not make the grade.

Regional community banks, as a rule, did not participate in the subprime market and came out relatively unscathed, but the Hudson Valley has seen several mergers, particularly the takeover of Union Savings Bank by Key Bank and the transaction between JP Morgan Chase and Bank of New York, with Chase significantly growing its retail locations throughout the region.

All banks, including local commercial and community banks, reported losses in 2007, although nowhere near that of the national banks and brokers involved in the subprime debacle in places like Las Vegas. Bankers attributed losses to the fall of the housing market and its effect on its commercial customers.

Salaries have not kept up with the increases, essentially leaving many Hudson Valley homeowners house rich and cash poor, according to the study.

According to the Marist data, coincidental to the disjoint between the growth in income and housing values is the increase in the percentage of households in financial distress. The U.S. Census Bureau estimates that between the years 2002 and 2006, the number of households nationwide in financial distress advanced from 28.99 percent in 2002 to 36.92 percent in 2006. Over the same time frame, New York state's figures jumped from 30.43 percent in 2002 to 40.93 percent in 2006.

With the exception of Ulster county, which squeaked under by a mere .07 percent under 40 percent, residents of he Hudson Valley are spending from a low of 41.43 percent (Dutchess) to a high of 47 percent (Putnam) of their disposable income on housing. Anything over 30 percent is considered to be in the at-risk category by economists.

While Pattern's keynote speaker Yaro did not have access to the college's 2007 when he spoke at the college two weeks prior to its release, he predicted that 2010 will be the year the region will hit rock bottom. Yaro told his audience the combination of a flooded housing market, escalating cost-of-living prices and the disparity between wages-to-expenses income would ultimately end the "sprawl" so many in the Hudson Valley have come to equate with so-called McMansions on six acre lots.

The demand for mass transit, "walkable" communities (read "city- like" with plenty of green space) and demands by New Yorkers for a property tax cap, reformation of the Wicks law (the state's bidding process for publicly funded projects) and pleas to make the state more business friendly could all combine to make 2009 a year of profound transition.

To read the full 129-page Marist report, compiled by Christy Heubner Caridi, the head of economic research for Marist's School of Management, and her staff, visit www.marist.edu/management/bureau.

Copyright Westfair Communications Jul 14, 2008

(c) 2008 Westchester County Business Journal. Provided by ProQuest Information and Learning. All rights Reserved.

Story Source: Westchester County Business Journal