What NW Indiana needs - Recovery

This site remains focused on creating economic opportunities in Northwest Indiana. I have spent the last ten years of my life working in creating communities, economic development, consulting with small businesses wanting to grow and evolve. It seems that all the world is discussing the economy right now, and in Northwest Indiana it's no different.

• We were not hit as hard initially by the housing downturn. Banks did squeeze the home builders early in 2007, putting roughly 50% of them out of business. This caused great distress in construction jobs and home building of course, but had the effect of limiting the inventory runup. Already positive indications that inventories are leveling and foreclosures are working through quickly.
• Mortgages can still be acquired, although mostly FHA lending so a little more expensive than in past years, so while rates were low in August there were a ton of refinances, and now after two years of sitting on the sidelines first time buyers are back out looking at homes again. (See FHA Mortgage Limits for Northwest Indiana)
  
• While housing was stagnant in 2007 and early 2008, commercial construction maintained its activity, and was able to support those looking for jobs in that industry. The Steel Industry, which is very important to the Region, was solid and actually hiring former construction workers back to the mill through the summer.
  
• In September, when banks started to pull all their money off the table, commercial construction finally began to crack. At this point the credit crisis hit Wall Street and Obama took the lead in all Presidential polls.
  

Where does NW Indiana go then in the next 12 months?

• The Steel Mills have already begun cutting back outside contractor work and overtime, mainly due to automakers and appliance problems.
  
• Commercial construction is on hold, on ice, awaiting the banks actually getting back into business. Residential construction is still on hold, and in my estimation the one easy place to get a burst of activity in the economy with aggressive push to build for first time buyers all over America.
• Inflation is non-existent, unemployment increasing to 6.5% and Wall Street jitters have everyone with a 401K uncomfortable.
  

Some steps I am recommending to construction clients:

• Find ways to build for the first time buyer, partner with lenders to help these buyers clean up their credit, acquire 3% down payment, and build at the lowest levels possible. This is the market that will recover first.
  
• Rehabs for existing homes can still pay margin, if you hold overhead to almost zero, and do most of the work yourself

Some steps I am recommending to communities:

• First time buyers are waiting for leadership, and we sorely need them in the market. Use your bully pulpit and time to raise the issue. With rates under 7% and home values depressed this is the time for these buyers to grab their first home. Home owners buy consumer goods, care for homes, pay property taxes ... we all need thousands of new home owners in our communities.
• Although Indiana has capped property taxes, use funds in 2009 wherever you can find them for infrastructure projects. Bid it out and be amazed how low the prices will be, do twice as much work as previously planned. Valparaiso's recent increase in AV is just one good example of investing and getting the return back immediately.
• Maintain a list of all employers of more than 5 employees in your community. Actively pursue them, asking "how can we help you grow?" This is no time to waste hundreds of thousands on out of town recruiting, this is time to grow the businesses already in your community and taking risks. Most will need help with capital and lending, since local banks are too scared of their shadows to help out. Help, bully, partner.

I'll leave the post hanging for now, and await more ideas in comments. Udpates to come later this week.