Boom And Gloom

By John Greenwald

Want a job? Try once down-and-out places like Houston, Salt Lake City and Gary, where newspapers are thick with help-wanted ads. But shun former go-go hot spots such as Boston, Phoenix and Atlanta, where 1980s-style booms in everything from computers to construction have suddenly gone bust.

Welcome to the upside-down '90s. Not since collapsing oil prices sent Texas and the rest of the Southwest into a slump nearly a decade ago has the U.S. witnessed such a stunning reversal of regional fortunes. The new winners include Midwestern farmers and Rustbelt manufacturers whose prosaic products, from corn to machine tools, are in hot demand around the world. Among the losers are Wall Street investment bankers, whose earnings have plunged with the waning of the buyout binge, and defense contractors across the country, who can expect new cutbacks as the cold war ends.

The boom-and-bust cycles are sharply affecting U.S. housing prices, which reflect regional economic health. In Houston, gone are the bad-old-days of the mid-1980s when U-Haul trucks streamed out of town as unemployment rose above 12%. A combination of stable oil prices and the arrival of new businesses has sparked a rebound in Houston home values. At the same time, Northeast housing prices are sinking and the explosive growth of California home prices has begun to cool.

The regional ups and downs belie the popular image of the U.S. as a single, monolithic marketplace where similar economic conditions prevail from coast to coast. While most experts expect the U.S. economy to expand at an anemic rate of 1% to 2% this year, vs. nearly 3% in 1989, that statistic masks the fact that some areas are already in a recession while others are steaming ahead. "This is still an economy made up of a lot of subeconomies," says Robert Dederick, chief economist of Chicago's Northern Trust Bank. "That will be true for a long time to come." A look at how the major regions are faring:

The Northeast: Down at the Heels. From Boston's high-tech wizardry to Wall Street's takeover deals, the Northeast was on a roll during most of the Roaring '80s. But Wall Street launched a series of layoffs after the 1987 crash and the Massachusetts minicomputer industry went into a spin. The double whammy left the region with a glut of unsold houses and banks with billion- dollar portfolios of bad loans. The Massachusetts economy, which grew more than 7% in 1984, shrank about 1% last year.

The regional downturn quickly spread to the housing market. The median price of homes in the New York City area fell from $190,000 in the third quarter of 1988 to $182,600 in the same period last year. In Connecticut so many condominiums are on the block that the state is setting up a program to acquire 500 units at bargain prices and rent or sell them to low- and moderate-income families.

The Southeast: Slow and Steady. Once a dizzily growing region, the Southeastern Sunbelt is currently expanding at a more stately pace. Many areas overbuilt grandly as new workers and companies poured in during the 1980s, only to find themselves stuck with painful housing and office surpluses when the influx stopped. The region now anticipates a period of moderate economic growth. "We need to absorb some of that extra supply," says Marc Bromley, president of the residential-sales division of Trammell Crow in Atlanta. "It will take us one or two years to get through the situation that was created a few years back."

Other misfortunes are impeding growth. In Florida the deep freeze that blasted across the U.S. last month damaged an estimated 40% of the state citrus crop. Defense-industry cutbacks have hurt as well. Lockheed Aeronautical Systems has trimmed its Marietta, Ga., work force from 20,000 to under 10,000 since 1988 as the military contractor completed a six-year project to overhaul jet transports.

The Midwest: Mostly Miraculous. Despite clear signs of a recession in the auto industry, much of the heartland has emerged from the trials of the past decade in surprisingly good health. Factories that laid off millions of workers in the mid-1980s as an overvalued U.S. dollar priced American products out of foreign markets have streamlined their operations and now compete effectively around the world. The rebound has lifted real estate values throughout the region. The median price of a single-family home in Chicago rose to $111,400 in the third quarter of 1989, up 10.5% from the previous year. Cincinnati prices climbed to $77,800, up 11.6%.

After years of hardscrabble existence, the farmbelt has begun to bloom. The growing worldwide demand for U.S. grain boosted 1989 farm exports 35% over 1988. The Department of Agriculture predicts that total U.S. farm income could reach a near record $57 billion in 1990, up from $53 billion last year.

Even as most of the region seems upward bound, Detroit is plunging into a painful slump. Ford, Chrysler and General Motors plan to close 42 of their 62 U.S. and Canadian plants, including 13 in Michigan, for up to three weeks this month, temporarily idling 140,000 workers. That marks the most sweeping round of auto layoffs since 1982.

The Southwest: Resurgent. After seeing energy prices plummet in the 1980s, the eyes of Texas are watching a steady economic rebound. Oil prices have jumped from $15 a bbl. in 1988 to $23 a bbl. But Texas is moving beyond its traditional dependence on energy, which accounted for 27% of the statewide economy in 1981 but is the source of only 15% today. Texas firms are expanding in such fields as biotechnology and telecommunications. Attracted by the mild Texas climate and a still low cost of living, such major companies as J.C. Penney, GTE and Exxon have moved their corporate headquarters there.

Yet the region's real estate market remains in fragile health. While the median price of Houston homes rose 8.2% in the third quarter to $70,900, the city is glutted with 55,000 vacant lots and the office vacancy rate is a towering 27%.

The West: Wild. From the supercharged Pacific Northwest to struggling Arizona, no region claims a wider range of strengths and weaknesses. Paced by high-flying Boeing, which is working off a four-year backlog of aircraft orders, Seattle is attracting newcomers from across the country. The median price of a Seattle home rose 23% in the third quarter to $110,000, marking the largest increase in the U.S. By contrast, Phoenix is mired in a real estate depression in the wake of a heedless building spree. Lenders foreclosed on more than 15,000 residential mortgages last year, up nearly 20% from 1988. In the Rocky Mountain area the Denver economy is still struggling to recover from the energy slump.

California is a country-size economy by itself, accounting for some 14% of America's total GNP. The main threat to the state's prosperity comes from looming defense cuts, which would have a sizable impact on Southern California's aerospace industry. Economists predict that unemployment in California will rise from 5.1%, vs. the current 5.3% U.S. average, to 7.4% in 1992, largely as a result of defense cutbacks. Meanwhile, the median price of a Los Angeles home reached $224,000 in the third quarter of 1989, up 18.7% from the previous year. Says Stephen Levy, director of the Center for Continuing Study of the California Economy in Palo Alto: "It's very unlikely that home prices will rush ahead in the next two years. It's not a crash scenario, but I don't see prices being pushed much higher." In the topsy- turvy world of the '90s, even the Golden State will endure a changing fortune.

With reporting by Cristina Garcia/Los Angeles, William McWhirter/Chicago and Richard Woodbury/Houston