News From Terre Haute, Indiana

February 5, 2014

Mixed bag of news presented at annual economic forecast

Indiana’s job creation effort overshadowed by slump in home sales, income disparity

Howard Greninger
The Tribune-Star

TERRE HAUTE — A mixed forecast of home sale prices and continued income disparity were among concerns discussed Tuesday during the 2014 Ground Hog Day Economic Forecast conducted at Indiana State University.

On a brighter note, Indiana Secretary of Commerce Victor Smith, the event’s keynote speaker, highlighted Indiana’s efforts to create new jobs. Smith leads the state’s domestic and international economic development agenda, serving as chief executive officer of the Indiana Economic Development Corp., created in 2005 to replace the state’s Department of Commerce.

“We want to be a little bit more aggressive this year in how we go about selling Indiana,” Smith told about 200 business people, educators and others gathered for the economic forecast. “We are really doing a lot more of a ‘hunter’ mentality, going out and grabbing companies and grabbing industries and bringing them back into Indiana.”

The IEDC already has attracted 19 new companies to the Hoosier state in January alone, adding 3,600 new job commitments and investments of $358 million, Smith said.

In 2013, the state added 261 new companies, the most since 2005, with more than 21,000 new job commitments and $2.6 billion in new investments, he said.

Smith also noted that the state is looking to encourage more capital investments from existing companies. “We have identified about 175 companies in the state, touching every single county, that we are going out to meet specifically to say, ‘Well, what can we do? Is it capital formation that you need, is it regulation issues? What can we do?’ We are trying to connect the dots,” Smith said.

After the forecast, Smith declined to name the companies, but said at least three companies are located in Vigo County.

‘Living on a prayer’

The economic future could be shaky as technology, specifically the Internet, could have a huge impact on jobs in Terre Haute, said Robert Guell, professor of economics at ISU.

Guell referred to a song from rock singer Jon Bon Jovi with the lyrics “living on a prayer” that could exemplify threats to the city’s workforce. Guell talked about Sony DADC and its presence in making digital audio discs and game components.

“What DADC is producing right now is decent temporary jobs for lots of people and pretty good jobs for a whole lot more,” Guell said after his presentation. “If all media is to be electronically driven, then many of those jobs are going away and are never coming back, just like the Columbia House jobs went away and are never coming back.

“We are vulnerable in the same way we were vulnerable to Columbia House [which produced records]. The story could easily repeat itself,” Guell said. “I think we are just living on a prayer at this point.”

Guell said another threat he sees to employment in 2014 is the requirement of employers with 50 workers or more to provide health insurance to those who work more than 30 hours, under the Patient Protection Affordable Care Act. That will result in companies converting some decent paying jobs with more than 30 hours, but no insurance, into bad paying jobs of under 30 hours, also with no insurance coverage, he said.

Nationally, Guell said an income inequality gap is increasing, “making it harder to jump up a rung on the economic ladder.”

 “It went from 8 percent of income being held by the top 1 percent to more than 23 percent of income held by the top 1 percent,” from 1980 to 2006, Guell said. That dropped back to about 15 percent of income being held by the top 1 percent just before the recession of 2009.

Guell predicts the national economy will grow this year at “a modest jog of 2.5 to 3 percent,” while unemployment will remain higher than the state average in Vigo County.

More sales for less

The housing market in 2013 was mixed as is the future of home sales in 2014, a Terre Haute real estate appraiser said.

Of five market indicators, two were up, two were down and one stayed even in 2013, compared with a year ago, said Brian Conley, president of Conley Real Estate Appraisals Inc.

Homes sales were up in 2013, with 1,048 homes sold, a 7.54-percent increase from the previous year, Conley said. The supply of homes for sale was also up, increasing to a 6.4-month supply from a 6.3-month supply.

“This time last year, the number of home listings on the market was the lowest it had been in 20 years. The market has become more balanced; however, if you look at the number of listings currently on the market, there are 484 houses on the market” this week, which is low, compared with 515 homes for sale in February 2013, Conley said.

The number of pending home sales stayed even in 2013 compared with last year.

Average prices paid for homes and the median price both have dropped, Conley said.

The average price of a home in 2013 was $97,949, a 5.32-percent drop from the previous year. The median price dropped 5.88 percent to $80,000 in 2013, down from $85,000 in 2012.

“We are selling more houses at a lesser price and the median price is less,” Conley said.

“The housing market is still being affected by the number of [mortgage] foreclosures. This, I believe, is shown with the decrease in the median price paid. The majority of foreclosures in Terre Haute tend to be at the lower end of the price range,” he said.

Conley said mortgage lenders in 2014 have stricter lending laws, which may decrease home loans to marginal buyers. Also, interest rates in 2014 are about 1 percent higher than in 2013.

“It would appear interest rates will continue to increase over the year and impact sales in 2014,” Conley said.

‘Some cautious optimism’

Like Indiana’s secretary of commerce, Gerry Dick, host and creator of Inside INdiana Business and president and managing editor of the Indianapolis-based Grow Indiana Media Ventures LLC, said 2013 had several “positive business stories.”

“I think we are seeing that Indiana is holding its own,” Dick said.

He pointed to Chrysler, now completely owned by Fiat, whose CEO said the company wants to make its Kokomo transmission plant the company’s world transmission headquarters.

“We are beginning to attract headquarter companies,” Dick said.

Dick said information technology jobs in Indiana “are growing at a rate three times the national average, so technology is gaining traction,” and said 2013 placed Indiana in the top five states for life sciences firms. Dick said the perception of Indiana as having a good business environment is growing. He referred to the publication called “Chief Executive Magazine,” which surveys 350 executives nationwide.

“For the second time in a row, Indiana was ranked number one in the Midwest and number five in the entire country as a place to do business,” Dick said.

“There is some cautious optimism heading into 2014. There are also some dark clouds that certainly remain. We hear a lot about the skills gap … and the lack of skilled workers for advanced manufacturing positions,” he said.

Dick said quality of life or quality of place incentives will continue to expand in 2014. “There is a lot of data that talk about how young professionals don’t necessarily go for the job, they select a community and then get a job,” Dick said.

Smith referred to legislation being considered by the Indiana General Assembly to study a “quality of place” plan. The plan would consider ways to invest up to $1 billion over a 10-year period in regional areas through partnerships with the private sector and local government for projects that would attract young professionals.

The state is also branding itself under “A state that,” which can be seen on the floor of the Indiana Pacers at Bankers Fieldhouse in Indianapolis. Smith said the state is using the branding to reach 84 national media markets that cover professional basketball at the arena.

The 2014 forecast, which is held annually close to or on Groundhog Day, was sponsored by ISU’s Scott College of Business, Terre Haute Savings Bank and the Terre Haute Chamber of Commerce.

Reporter Howard Greninger can be reached at 812-231-4204 or