WASHINGTON – There’s good news and bad news in the economic outlook this year for Maryland, experts say.
The good news is that the technology information industry is expected to start bouncing back from the decline of recent years. The bad news is that the rise in home values is expected to slow after two extraordinarily good years.
Except for those highs and lows, however, experts and economists said the state can generally expect a good year, with continued growth in the defense, health care and education sectors that have allowed the state to outperform the nation in job growth in the last two years.
A forecast released last week by the American Bankers Association said Maryland firms have received new defense contracts, while an aging population should increase employment in healthcare and a surge in school-age population will boost educational services.
John E. Silvia, the chief economist for Wachovia Securities, said these areas have been the underlying base of sustained growth in Maryland since the recession hit in 2001, and they look to continue strong in 2004.
The information technology is expected to join those healthy sectors this year, said the ABA, which noted that the employment decline of the last two years has already started to ease. Silvia said that means more technology investment and jobs can be expected.
One reason for the turnaround is that significant numbers of homes and businesses have 3- to 5-year-old computers that will have to be updated, said Pradeep Ganguly, chief economist for the Maryland Department of Business and Economic Development.
The tech sector is also being helped by some tax benefits granted by the state, said Anirban Basu, chief executive officer of Optimal Solutions Group, a consulting firm in Baltimore.
But both Basu and Ganguly said that while there will be new jobs in the tech industry, it will not necessarily be a big number of jobs.
“What has been anticipated is not a great deal of job creation because there are businesses still tight with cash . . . but it will be much better than in the previous three or four years,” Basu said.
But the recovery of overall economy will come with a side-effect: Strong appreciation in housing values of the last few years is expected to cool off or even decline.
The ABA said home values have appreciated slightly faster in Maryland than in the rest of the nation, but that is already starting to change.
Ganguly said many people refinanced their mortgages and moved into more expensive homes because rates were low.
“But as economy starts to improve, it will push interest rates higher and then the demand for housing and mortgages will decline . . . but the market will still be strong,” he said.
Silvia said that change is to be expected as the economy enters a recovery cycle. The situation is not good or bad at the moment, he said, but needs attention.
“If appreciations go down slowly, development of homes comes into question . . . that’s the challenge,” he said.
Another question is how many people will not be able to afford homes at all as a result of the change in the housing market, said Glenn Mueller, professor of Real Estate Capital Markets Research in Johns Hopkins University. He believes appreciation will slow down, but not drop.
But Mary C. Antoun, chief executive officer of the Maryland Association of Realtors, believes that even if there really is a decline, the market will still be good.
“That’s what they said about 2003. They said 2002 was so good that 2003 can’t be that good and we sold probably 90,000 units more than in 2002,” Antoun said.
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