Economist Confident Michigan Housing Market Will Rebound

Michigan might be in a one-state recession, but according to the Grand Rapids Press, at least one economist insists better days are coming.

“We are not sad sacks,” Dana Johnson told the Economic Club of Grand Rapids’ meeting at Amway Grand Plaza Hotel on Monday.

“We have to grit our teeth, we have to get through the first half of the year… but I think we’re less than 12 months away from the bottoming out of the Michigan economy,” said Johnson, a Senior V.P. and Chief Economist at Comerica Inc.

His economic forecast for 2007 was met with some skepticism from the crowd, many of whom are worried about Michigan mortgage problems taking over the state, during the Q&A period and after his talk.

But he remains upbeat.

“People are really down in the mouth in Michigan, and I think one of my key messages that I wanted to impress is that we shouldn’t be as down in the mouth as we are,” he said.

The announcement last week by Pfizer that it would cut 2,400 research and development jobs in Kalamazoo and Ann Arbor was not only a blow to the state’s morale, but to the Michigan housing market.

This was especially true because the jobs in question were in the life-sciences sector, which has appeared to be on the rise.

“Those 2,500 jobs at Pfizer represent 0.06 percent of the jobs in Michigan. If Michigan were growing in a healthy fashion, we wouldn’t be much concerned about what’s going on at Pfizer,” Johnson said.

Loss of market share by the Big Three automakers General Motors, Ford and DaimlerChrysler further hurt their balance sheets, leaving Michigan in recession and staring down myriad foreclosure problems.

Meanwhile, the rest of the country is recovering - at least in everything but the housing market.

“What happens when you destroy jobs and income, you also destroy housing values. You create this fear; people don’t buy new houses,” he said.

While the auto industry buyouts and reductions in salaried work force will hurt, they front-loaded the pain and after those cuts the state will start to recover, he said.

“Only one out of 20 jobs in Michigan is in auto and auto-parts manufacturing,” Johnson said.

Johnson said Internet search engine firm Google’s announcement to create 1,000 jobs in Ann Arbor is typical of the kind of knowledge-based work that will improve the state’s future.

Such companies soon will realize the state makes for cheaper operations than San Jose, Calif., because the cost of living is lower in Michigan, while California mortgage loan costs are exorbitant.

Wondergem Consulting President Tim Wondergem asked Johnson if the state can be competitive with a pool of displaced manufacturing workers.

Johnson replied workers are smart enough to see the changes coming and will adapt, pointing to retraining being among ways they can do that.

“I’m still not convinced … that Michigan has found the right systemic strategy to identify how to leverage everything it’s got left behind, to the benefit of playing in the new economy,” Wondergem said.

James Conner, West Michigan regional manager for Granger Construction Co., said while his commercial construction business is doing well, his colleagues in residential construction are hurting.

“I like his optimism,” he said. “I wish it was a little more contagious.”