Kentucky experts vary in outlook

Kentucky Foreclosure & Real Estate News

By Karla Ward

While there's plenty of depressing news when it comes to the economy, Kentucky is faring better than the nation as a whole, according to one economic expert.

"I actually think the situation for Kentucky looks reasonably optimistic," said Ken Troske, director of the University of Kentucky's Center for Business and Economic Research.

Foreclosures, inflation, unemployment and energy prices are all higher.

But both the U.S. and Kentucky economies experienced growth last year that exceeded expectations, and Troske said that, although he expects it will slow in 2008, he does expect to see growth again.

In Kentucky, foreclosures have not increased as much as they have on the national front, and housing prices here never ran up like they did nationally, so the market has not seen the subsequent drop in prices that many parts of the country have.

The dollar is down, but the lower exchange rate could help Kentucky, which Troske said has the 18th-largest rate of exports in the country.

And, though U.S. markets have hit a rough patch, Troske said "people aren't getting out of the market. This seems to be affecting institutional and professional investors more than anybody else."

Troske, who is not convinced the United States is in a recession, said he thinks the phrase "irrational pessimism" might be one interpretation of the current mood.

The National Bureau of Economic Research defines a recession as two consecutive quarters of decline in the gross domestic product.

"We haven't done that yet," Troske said.

But using a looser definition, Don McNay, chairman of the board at McNay Settlement Group in Richmond, said he thinks the United States has already entered a recession.

"It's crunching the end of the economy that just can't spend any more," he said. "There's a tremendous lack of economic confidence."

He said he expects a turnaround in about six months.

Retired Transylvania University economist Larry Lynch's take on the recession issue falls somewhere between those of Troske and McNay.

"We're kind of on the brink," said Lynch, who also serves as chairman of the state Consensus Forecasting Group, which predicts state government revenues. "It's probably 50-50 right now."

He said perhaps the Federal Reserve's rate cuts will help stave off a recession.

While it's never too late to take action, McNay said he thinks the Fed was late in making the cuts.

"Today was the Fed reacting in fear," he said. "They really should have reacted in August."

Without the rate cuts, "God knows what would've happened this morning," he said.

For individuals and businesses with good credit, this could be an opportune time to invest in a new home or office equipment.

"It's a great opportunity for people who are positioned" to take advantage of it, McNay said. "Now is not a bad time to borrow money."

Lynch said that if the interest rate cuts encourage spending, that could help state government's dour economic outlook.

Kentucky faces a revenue shortfall of $128.5 million, the Consensus Forecasting Group estimated last week.

Lynch said he's not ready to revise the forecast again based on the Fed action, but "if we get more sales and income (taxes), we'll do better," he said.

 

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