The AP reports that mortgage lenders are seeing a slowdown in re-fi's and home buying. This is bad news for Washington's economy, as well as for the whole country. Residential construction, remodels, and attendant purchases have floated the economy for the past four years. Re-fi's have brought equity out of houses and into the consumption economy. It had to end. The question is, How hard will we fall?
The economy of Western Washington ought to be rising with its big exporters like Boeing, Microsoft and Paccar. Instead, we like the rest of the country, have been floating on the sea of red ink in residential construction and housing-related activities. (The red ink from the Feds, funneled into the pockets of the rich and into the war in Iraq, doesn't do much for the economy.)
The state's chief forecaster Chang Mook Sohn has been warning for some time that the improvement in the state's finances he projects depends on housing, and when it falls, it could take the state down with it.
Historical trends analysis developed by Dean Baker of the Center for Economic and Policy Research (www.cepr.net) says the correction could be sharp. Baker was one of the few economists to call the stock market bubble bursting while others were blithely predicting the New Economy would carry us up to Dow 36,000. For the past several years he has predicted a similar bursting of the housing bubble.
When it happens it will kill the jobs picture here in Washington and will absolutely crunch the revenue situation for all levels of government. With the Rube Goldberg revenue archetecture we've got, and the general ignorance purveyed by the anti-tax right wing, the outcome is not pretty to contemplate.