Dr. Tucker Adams forecasts 2008

Dr. Tucker Adams, local consultant and economist, provides annual forecasts.

The ‘Duchess of Doom’ lived up to her nickname this evening. She can jest at the title this year as many of her peers are comfortable enough to predict far more pessimistic outcomes for 2008.

In general, here are some topics that she covered, national first, then Colorado specific.

• 2.1% GDP growth (same as 2007)




• 1Q of recession (believes that we are currently in a recession and points out that a recession is officially announced 9months in arrears)




• Unemployment will increase* 4.5M Americans are jobless and the number of jobs will decrease.




• Housing permits and sales will drop (the worst is behind us)




• 30yr fixed will rise to at least 6.9%.

She is most concerned with the effects of consumer spending. During this economic downturn consumers will not have the confidence or the ability to borrow in order to maintain their current spending levels. The effects of the recession in 2001 were minimized due to consumers increasing debt (revolving credit and borrowing against home equity) in order to maintain standards of living. Both the jobs and the resources to borrow funds will not be as available this time.


COLORADO : There is not much difference from the national perspective.

• Colorado’s housing market will not be hit as hard as the national market. Colorado stopped over-building its inventory earlier.




• Office vacancy remains solid at 17%.




• Grand Junction – seeing an incredible O&G exploration and pipeline boom. The average home price in Rifle is $325k. Housing is appreciating tremendously because the city planners are limiting the develop which will minimize the negative impact of the impending bust expected in the next two years when the exploration and infrastructure tapers off.




• Ethanol hysteria is crazy. It’s a political move for the agricultural folks to promote corn as a fuel source and invest in refineries. Corn provides negative energy when converted to ethanol, unlike Brazil’s sugar cane that yields a 6-to-1 gain or wood chips (cellulose) which can yield 16/1.




• Colo. Springs will have a very difficult three years. In anticipation of doubling the active duty personnel at Ft. Carson to 20,000 by 2009, significant over-building has occurred.




• Even though multi-family housing has subsided in Colorado, Denver continues to invest in condos which will be unfilled and depress the market longer.




• Tourism has been great but will certainly be strongly impacted by the reduced consumer spending this coming year.




• Exports are down and going down (high-tech and agriculture).

*Dr. Tucker explained her concerns with using Unemployment statistics as an indicator. It is lagging
based on sample surveys from employers and homeowners
only accounts for those who have actively looked for work in the past 4 weeks, regardless if collecting unemployment or if underemployed or need a job (but have given up)

General statistics and advice :
Obligation ratio is at an all-time high; 17% (for home-owners) & 25% (for renters)

Home prices, like stocks, can go down—do not put such faith in the balance sheet affect of your assets.

CondoFlip.com finally folded when “the greater fool didn’t show up!”

Subprime risk was believed to be ‘diversified away’ and barely added a risk premium to normal interest rates. The market has been re-calibrated to the risk and an interest rate premium will reflect this.

The best thing that the Fed did wasn’t in Discount Rate adjustments but in convincing banks to borrow from the Fed without prejudice.