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Economy permeates ‘08
  
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By Danny Smith
Adam Smith is often considered the father of modern economics and described market forces as an “invisible hand.” The nation felt its trembling fingers this year and northern El Paso County has not escaped its shaky reach. After the housing bubble burst, gas prices spiked and a monolithic federal bailout ensued intended to keep credit flowing in a floundering market — and the full effects of the staggering figures dealt out to financial institutions have yet to be realized. The scope of the downturn is global but has enough local effects to be The Tribune’s most significant story of 2008.
Boom to bust
Many homebuyers and builders struck gold at the beginning of the millennium, before a sudden bust. As housing demand skyrocketed along with the value of homes, people would take on more debt based on the assumption that home values would move ever skyward. Lenders gave out sub-prime loans to high-risk buyers often without requiring a down payment.
Then in 2006 the housing party ended as supply grew, demand dropped and now El Paso County is experiencing record-breaking foreclosure numbers. Northern El Paso County has seen tremendous development in recent years which contributes to slightly higher foreclosure rates than the rest of the county.
According to El Paso County Public Trustee Thomas Mowle, some Tri-Lakes communities have a higher-than-average foreclosure rate in part because of the new mortgages picked up by buyers who thought the value of their homes would keep rising, he is seeing many of the foreclosures concentrated in new mortgages.
“People would stretch maybe further than was smart in buying property,” Mowle said. “They were taking a chance and making the assumption that things would get better and the market would stay good. But with the lack of liquidity, they are finding themselves stuck and going into foreclosure. They weren’t worried about the money because they could sell if they weren’t making the money.”
Newer areas of Pine Creek, Flying Horse and Jackson Creek are seeing higher foreclosure rates because of the new developments but houses in Gleneagle, with its older homes and older mortgages, are less likely to foreclose because residents generally have steady payments and increasing income.
In February, President George Bush passed a stimulus package to increase the availability of Federal Housing Administration loans, which are government insured and require smaller down payments than traditional loans.
"Generally speaking, the FHA loan limit increase will increase business and sales on the mortgage side because it allows people to buy more house. FHA loan guidelines allow for a broader range of borrowers to be approved then they would with a conventional mortgage," said loan officer Allen Peterson of Academy Mortgage Corp., who works with loans in the Tri-Lakes area.
Local realtors saw an up tick in the amount these loans as the stimulus was passed, but the market continued to wane and led to some local slowdown of housing construction.
With so many bad mortgages out there and no one to buy them, the credit market began to seize up and furthered the downturn.
Insult to injury
When gas prices spiked in the summer and reached $4 per gallon, northern El Paso County residents were hit a little harder because many of them commute into Colorado Springs and Denver. Fill ups costing $100 were not unheard of and people began to rethink what and how they drove.
"We have seen an influx of people looking for fuel-efficient vehicles. SUV and large truck sales have slowed slightly," said Jim White general manager of Chapel Hills Ford around the time of the gas-price peak.
Monumentmotors.com in Monument experienced a similar phenomenon.
"People might come in with a big Suburban and need to downsize to something with more fuel efficiency,” said Curt Reese of Monumentmotors.com. “Some people are buying an extra car and use the more efficient car when they can and drive the Suburban when they need the larger capacity."
Food prices also shot up with the gas prices as transportation and production became more expensive and local food banks saw an increase in need for aid that still continues with the worsening economy. Care and Share and Tri-Lakes Cares both provide assistance to families with financial struggles and both organizations saw a growing demand for their services this year.
“We have seen an increased need across the board and an increase in people we are seeing for the first time," said Carrie Oliver, assistance program manager for the Tri-Lakes Cares center, "as well as an increase in the people seeking jobs through the Pikes Peak Workforce Center."
There are beneficiaries to such an economy. Discount stores like Walmart and second-hand stores observed an increase in sales along with some fast food chains experiencing an influx of customers who wanted a cheap meal.
Monument-based second-hand shop Two Timers Fine Consignment saw a boost from income over last year according to its owner P.J. Harshman, even with a slowed economy.
No public immunity
While the federal government was — and is — busy trying to come up with a plan to address the recession, local government entities saw, and continue to see, effects of their own.
El Paso County, after experiencing years of a languishing budget, may have been denied a sales tax increase to bolster public safety because residents didn’t think they could afford the hike in the current market, according to District 1 Commissioner Wayne Williams. The county just presented a newly trimmed budget and had to transfer road and bridge funds into the general fund because of slumping sales tax figures driven by decreased consumption.
Schools have also seen signs of the slump. Both Academy School District 20 and Lewis-Palmer School District 38 saw a bump in the percentage of students applying for free and reduced-priced lunches at the beginning of the 2008-2009 school year.
“I believe it is because of the economy,” said D-38’s nutrition services supervisor Katie Dubois. “When they fill [the application] out, they often fill out ‘no longer employed.’”
Students wanting to attend college have been seeking more financial aid and are opting more often for the cheaper community college route. Some local administrators have said it is at least in part due to the economy.
What lies ahead?
Economists decided a few months ago that this is a recession and that it arguably began in December of 2007, the exact date may be a point of contention among scholars, but the average person out there can see that things are little tough right now.
Home prices and mortgage rates are currently at historic lows, unemployment rates continue to rise and gas is back below $2 a gallon.
What does it all mean and where does it go from here?
Analysts expect the economy to get worse before it gets better, but they do expect it to get better.
“Investment professionals and big companies think that [the downturn] will be longer and slightly deeper,” said Monument investment advisor Ben Glidden. “But nobody is talking about a 1930s depression,” he said.
Boom to bust
Many homebuyers and builders struck gold at the beginning of the millennium, before a sudden bust. As housing demand skyrocketed along with the value of homes, people would take on more debt based on the assumption that home values would move ever skyward. Lenders gave out sub-prime loans to high-risk buyers often without requiring a down payment.
Then in 2006 the housing party ended as supply grew, demand dropped and now El Paso County is experiencing record-breaking foreclosure numbers. Northern El Paso County has seen tremendous development in recent years which contributes to slightly higher foreclosure rates than the rest of the county.
According to El Paso County Public Trustee Thomas Mowle, some Tri-Lakes communities have a higher-than-average foreclosure rate in part because of the new mortgages picked up by buyers who thought the value of their homes would keep rising, he is seeing many of the foreclosures concentrated in new mortgages.
“People would stretch maybe further than was smart in buying property,” Mowle said. “They were taking a chance and making the assumption that things would get better and the market would stay good. But with the lack of liquidity, they are finding themselves stuck and going into foreclosure. They weren’t worried about the money because they could sell if they weren’t making the money.”
Newer areas of Pine Creek, Flying Horse and Jackson Creek are seeing higher foreclosure rates because of the new developments but houses in Gleneagle, with its older homes and older mortgages, are less likely to foreclose because residents generally have steady payments and increasing income.
In February, President George Bush passed a stimulus package to increase the availability of Federal Housing Administration loans, which are government insured and require smaller down payments than traditional loans.
"Generally speaking, the FHA loan limit increase will increase business and sales on the mortgage side because it allows people to buy more house. FHA loan guidelines allow for a broader range of borrowers to be approved then they would with a conventional mortgage," said loan officer Allen Peterson of Academy Mortgage Corp., who works with loans in the Tri-Lakes area.
Local realtors saw an up tick in the amount these loans as the stimulus was passed, but the market continued to wane and led to some local slowdown of housing construction.
With so many bad mortgages out there and no one to buy them, the credit market began to seize up and furthered the downturn.
Insult to injury
When gas prices spiked in the summer and reached $4 per gallon, northern El Paso County residents were hit a little harder because many of them commute into Colorado Springs and Denver. Fill ups costing $100 were not unheard of and people began to rethink what and how they drove.
"We have seen an influx of people looking for fuel-efficient vehicles. SUV and large truck sales have slowed slightly," said Jim White general manager of Chapel Hills Ford around the time of the gas-price peak.
Monumentmotors.com in Monument experienced a similar phenomenon.
"People might come in with a big Suburban and need to downsize to something with more fuel efficiency,” said Curt Reese of Monumentmotors.com. “Some people are buying an extra car and use the more efficient car when they can and drive the Suburban when they need the larger capacity."
Food prices also shot up with the gas prices as transportation and production became more expensive and local food banks saw an increase in need for aid that still continues with the worsening economy. Care and Share and Tri-Lakes Cares both provide assistance to families with financial struggles and both organizations saw a growing demand for their services this year.
“We have seen an increased need across the board and an increase in people we are seeing for the first time," said Carrie Oliver, assistance program manager for the Tri-Lakes Cares center, "as well as an increase in the people seeking jobs through the Pikes Peak Workforce Center."
There are beneficiaries to such an economy. Discount stores like Walmart and second-hand stores observed an increase in sales along with some fast food chains experiencing an influx of customers who wanted a cheap meal.
Monument-based second-hand shop Two Timers Fine Consignment saw a boost from income over last year according to its owner P.J. Harshman, even with a slowed economy.
No public immunity
While the federal government was — and is — busy trying to come up with a plan to address the recession, local government entities saw, and continue to see, effects of their own.
El Paso County, after experiencing years of a languishing budget, may have been denied a sales tax increase to bolster public safety because residents didn’t think they could afford the hike in the current market, according to District 1 Commissioner Wayne Williams. The county just presented a newly trimmed budget and had to transfer road and bridge funds into the general fund because of slumping sales tax figures driven by decreased consumption.
Schools have also seen signs of the slump. Both Academy School District 20 and Lewis-Palmer School District 38 saw a bump in the percentage of students applying for free and reduced-priced lunches at the beginning of the 2008-2009 school year.
“I believe it is because of the economy,” said D-38’s nutrition services supervisor Katie Dubois. “When they fill [the application] out, they often fill out ‘no longer employed.’”
Students wanting to attend college have been seeking more financial aid and are opting more often for the cheaper community college route. Some local administrators have said it is at least in part due to the economy.
What lies ahead?
Economists decided a few months ago that this is a recession and that it arguably began in December of 2007, the exact date may be a point of contention among scholars, but the average person out there can see that things are little tough right now.
Home prices and mortgage rates are currently at historic lows, unemployment rates continue to rise and gas is back below $2 a gallon.
What does it all mean and where does it go from here?
Analysts expect the economy to get worse before it gets better, but they do expect it to get better.
“Investment professionals and big companies think that [the downturn] will be longer and slightly deeper,” said Monument investment advisor Ben Glidden. “But nobody is talking about a 1930s depression,” he said.
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