Economist: Local Change, Muted in Comparison

PHILADELPHIA-In order to understand what is happening in the local market, it is important to first understand what is going on in the economy as a whole. During RealShare Philadelphia’s “Two Views of the Market: The Economist and the Investor” session, moderator Ken Balin, president and CEO of AMC Delancey Group Inc. spoke to William Dunkelberg, chief economist at Temple University and Ward Fitzgerald, senior managing principal at Exeter Property Group LLC to get a sense of where the Philadelphia market stands as well as our economy as a whole from two very different perspectives.

Dunkelberg first set the stage for the audience of approximately 500 by providing a visual tour of what’s currently happening in the US economy. He first pointed out that much of the problem in today’s economy is that “we now spend more than our after tax income. We do this by using credit…we are borrowing lots of money.” He explained that for quite a few years, there have been far more houses built than people to fill them. “It’s like musical chairs with too many chairs. This is an underlying asset that’s behind all the mortgage-backed security problem.”

He noted that “the credit crunch is not on Main Street, it is on Wall Street.” He also said that “inflation is picking up as a concern for small business owners, and that’s not a good sign. That’s what everybody is worried about the Fed’s losing sight of.” Dunkelberg further explained that the Fed’s announcements have also had an impact on the economy in terms of expectations. “Just before the fed cut, according to a survey I conducted back in September, virtually one in four business owners thought the economy would keep getting better. Twelve days later, it went down to 5%…the fed scared everybody to death and everybody panicked.” Losses are really big, Dunkelberg said. When banks loose money, “it impairs their ability to fund many projects.” Lower interest rates will not help our market today he explained. “The irony of this whole thing is that we are solving the problems of cheap credit by adding more cheap credit. Can the Fed’s manage its way out of that?” he queried.