West Virginia Housing Market Slowing, Not Crashing, Economist Says

Sliding demand for coal and home mortgage loans alike are going to put a damper on the state’s economy for the next five years, a West Virginia University economist predicted Wednesday.

Coal mining and home construction largely fueled new job growth over the past three years, WVU professor George Hammond said in presenting his annual economic forecast. Combined, the industries added approximately 12,000 jobs over the past three years, nearly half of West Virginia’s total, the Huntington Herald-Dispatch reports.

“That’s unusual,” Hammond said.

And unlikely to continue.

Waning demand already has cut coal prices and lowered production. When it comes to construction, particularly of new homes, figures to slow due to higher mortgage rates and larger inventory.

However, Hammond predicts the West Virginia housing market will suffer less than the rest of the country. The housing slump already is resulting in lower corporate and severance taxes on coal. For instance, severance taxes are expected to hit $315 million this year, then drop to a range from $250 million to $300 million.

Hammond did have several good things to say about the state’s economic future. The state added 26,600 jobs between the second quarter of 2003 and the same period this year. Mining and other natural resource industries added 5,200 jobs and education and health care positions rose by 6,200. The population grew at the same time.

However, Hammond said there are some risks facing the state. Among them, a national recession and the potential decline in housing starts as well as state manufacturing jobs. While Hammond said he expects those losses to stabilize at best, he expects increases in other facets continue to grow.

This just goes to show the trickle-down effects mortgages (and the cost of them) have on an entire state’s economy. When no one’s buying homes, everyone gets pinched a little harder.