Tourism is silver lining amid dark housing news in Kill Devil Hills

KILL DEVIL HILLS

Houses are sitting on the market for many months, and contractors and suppliers are hurting for business.

But the upside of the economic downturn in the nation and on the Outer Banks is that American vacationers on the East Coast will be more likely to stay close to home, and Europeans will be more likely to visit.

"If you look at the construction component of the Outer Banks, I think you're going to have problems there for a while," James W. Kleckley, director of the Bureau of Business Research at East Carolina University, said in a telephone interview.

"But if you look at the tourist component, which by and large is the main driver of the economy, that should continue to be strong in spite of the rising cost of transportation. People still want to vacation."

Europeans are visiting the United States, he said, because of the strong value of the euro versus the weak dollar.

Kleckley presented the annual economic forecast Wednesday at a program co-sponsored by the Outer Banks Chamber of Commerce and Albemarle Mortgage and Ocean Insurance Services.

Using a slide show with graphs and charts, Kleckley compared the Outer Banks' economy with that of the nation and the state, offering hopeful predictions in between explanations for dismal outcomes.

Yes, the value of the dollar has been "annihilated," he said, but the cheaper dollar has encouraged more foreign investment in the United States. Consumer spending nationally is hovering at just 1.5 percent growth this year, but at least it's still growing. Yes, a recession has threatened, but so far it has been avoided, he said.

"We expect things to start picking up by summer," Kleckley told the filled room at the Ramada Plaza in Kill Devil Hills. "Hopefully, the tough times nationally are going to be short-lived."

The Outer Banks housing market, which serves a large number of second-home buyer and retirees, probably will see a slower recovery than the rest of the nation, he said.

The largest percentage of Outer Banks employment, 18 percent, is in accommodation and food service.

The percentage of those in the retail trade is almost the same. The third largest, about 15 percent each, is construction and administration. About 25,000 people were employed in businesses on the Outer Banks in mid-2007.

Nationally, there were 2 million housing starts in 2005, according to data Kleckley used. But this year, 1 million starts are predicted. The softening is clear on the Outer Banks, where there were 10 building permits issued per month in 2007; in 2003, 150 permits per month were recorded.

"I think we might be plateauing; I don't think it can get any worse," Duke Geraghty, past president of the Outer Banks Home Builders Association, said in a later interview.

Geraghty said bad publicity has hobbled what should be regarded as a good opportunity to build, he said. Construction labor is available, timber is at a 10-year low and most landowners are willing to negotiate.

The pain has trickled down to the suppliers, the plumbers, the landscapers, the electricians, even the architects and the lawyers.

Geraghty said this is the worst slowdown he has seen since moving here in 1991.

"In my opinion, it could go on for a year - but it's not based on any science," he said. "We're all experts. But we don't know anything."

Many factors will influence the health of the economy, Kleckley said, including housing prices, the availability of credit, the ability of residents to sell homes, the balance between growth and the environment, natural hazards.

"So the outlook depends on what everybody else does," he said. "The real bottom line is, it depends upon local leadership and decisions."

Catherine Kozak, (252) 441-1711, cate.kozak@pilotonline.com