Richard DeKaser, deputy chief economist at Parthenon Group LLC in Boston, says that the region’s "half-speed recovery," may finally be picking up a bit of steam.
Speaking at the Great New England Credit Union Show in Boxborough yesterday, DeKaser said household debt is nearly back on track after years of deleveraging following the big run-up in the 2000s. Banks, meanwhile, have cut their loss rates in half over the last year and capitalization ratios are extremely high, he said.
For banks, "We’re not back to normal….but we’re sort of in the high end of what would be considered normal," he said.
Banks may be back in the black, but more importantly, they may soon have someone to lend to, with the recovery in the housing sector seeming to strengthen over the past few months.
"We’re digging out from the damage done to asset values, and the prospects for further improvement seem pretty strong," DeKaser explained. He figures that the dreaded shadow inventory may be less dangerous than it seems, as improving job prospects are finally driving young graduates and others out of their parent’s basements and into new households of their own.
The 3 million households’ worth of pent-up demand ought to be enough to absorb the bulk of the inventory in the foreclosure pipeline, and allow for new construction to grow, according to DeKaser.
The entire stock of new homes for sales in 2011, approximately 150,000, would not be enough to make up for the number of homes that are typically destroyed every year due to natural disasters, fires and other causes, he pointed out.
And in another perhaps welcome piece of news to the banking industry, DeKaser’s lighthearted read on the tea leaves suggested that even though the economy’s improving, a Republican recapture of the White House is still the odds-on favorite outcome for November.
One cloud on the horizon, however, is the uncertain fate of the Bush tax cuts, which are due to lapse on Dec. 31. And with a bitter election season ending only a few weeks prior, it’s possible that Congress may not be able to come up with a solution to preserve the stimulus they provide.
