OC Home Bank president, Brady, delivers bright economic forecast

Last Updated on Monday, January 21, 2013 01:09 pm Written by Ann Richardson Friday, January 18, 2013 02:13 pm

OC Home Bank president, Brady, delivers bright economic forecast

OCEAN CITY – Though the area was rocked by Hurricane Sandy, Steve Brady said there was a silver lining to the devastation: More construction jobs for the region and a “banner year for tourism.”

Brady, president of Ocean City Home Bank, delivered his 22nd annual economic forecast to members of the business and professional community at the Chamber of Commerce’s monthly meeting on Thursday, Jan. 17 at The Flanders.

“There are a lot of really good things,” he said, of the local forecast. Harrah’s Conference Center is under construction, Margaritaville and Bass Pro Shops are coming soon.

“Atlantic City will continue to have its challenges,” he said, yet the expansion of non-gaming revenue will be a bigger draw for Ocean City.

“We need to get the word out,” he said, that the shore is open for business.

News reports of the boardwalk in Atlantic City washing away hurt the region, he said.

An emphasis should be on shopping locally, Brady said.

He said that the ingredients are there for the nation’s economy to grow.

“The biggest impediment is government,” he said.

Cheap energy, he said, in the form of fracking, “could be the next dot-com.”

“It could be the catalyst for growth,” he said, adding that a lot of capital remains on the sidelines “waiting for Washington” to get out of the way.

Brady said it will be a “transitional year” with continued volatility on the national stage.

Reviewing the past year while predicting the new one, Brady said 2012 wasn’t so bad, despite Sandy’s wrath.

There was good news for local merchants to hang their hats on, he said, as 2012 brought the completion of the Ninth Street bridge and causeway. It also brought the reopening of Stainton’s and its 60 boutiques – twice –and 8,000 people to Ocean City for First Night after the storm.

In 2012, the community, Brady said, survived the Mayan Calendar and finally put to rest the BYOB issue. A “strong summer season” ended with Hurricane Sandy, but even in the midst of despair, he said the community learned “what a great job local government and the whole town of Ocean City” did in the cleanup, repair and recovery process. 

The Dow ended the year at 13,104, up 887 points, a gain of 7.3 percent, compared to a 5.5 percent gain in 2011.

“That’s the third year in a row with a gain,” he said. Interest rates remained flat.

The 30-year mortgage rate went from 3.92 percent in 2011 to 3.54 percent at the end of 2012, a 60 year low.

“The unemployment rate was at 7.8 percent, compared to 8.5 percent at the end of 2011,” Brady said. “This is the lowest rate in nearly four years.”

However, he said that “real unemployment,” when all variables are calculated, was at 14.4 percent.

Consumer confidence, he said, was down, from 71.5 percent to 65.1 percent.

The nation’s $16.4 trillion debt, up from $15.2 trillion at the end of 2011, has him very concerned, he said.

“That’s a staggering number,” Brady said, “the elephant in the room.

“There seems to be a delusion that we can out of the debt by increasing taxes,” he said.

Unfunded government liabilities, he said, total $84 trillion and go unreported.

“We have to be cognizant,” he said, of unfunded Medicare, Social Security, military and civil servant pensions, and more at both the federal and state level.

Brady said he hoped to see “meaningful reform,” as we can’t continue to spend $100 billion more each month than we are taking in.

“It’s unsustainable, we have to do something,” he said. If not, he predicted a value added tax, or VAT, would be implemented on the goods we buy.

“Class warfare has to stop,” he said. “Over and over we heard that the rich are not paying their fair share, yet the top 5 percent of wage earners pay 60 percent of the federal income taxes.”

The “fiscal cliff” legislation of 2013 raised taxes by over $600 billion, $60 billion per year for 10 years, he said, adding that $78 million went to the auto racing industry, $12 billion to the renewable energy industry.

“It was a charade on New Year’s Eve,” he said, as the $60 billion raised will “do nothing to the $1.1 trillion deficit.”

“It had to be loaded with pork,” he said, lamenting a “broken system” besieged by “political paralysis.”

“The president needs to lead at this point of time, and I’m looking forward in 2013 for the president to lead,” Brady said.

An overburdened regulatory environment, he said, needs to be addressed.

The real estate market, he said, continues to struggle because of lingering foreclosures. It currently takes 960 days for the disclosure process to be completed due to a backlog of distressed properties, making it impossible to determine measurable market improvement.

Prices, however, stabilized towards the end of 2012 with an increase in sales.

“Interest rates at an all-time low have allowed more borrowers to purchase homes,” he said.

The total number of unsold units in Ocean City in 2012 was 734, he noted, an improvement from 963 in 2011. In 2012, 864 units were sold, up from 737 units in 2011 and 643 units in 2010.

“I believe that Ocean City is a little ahead of the curve, it’s a good time to buy in Ocean City,” he said.

The average sale price ticked up, from $564,442 in 2011 to $578,385 in 2012. The number of new construction building permits issued in 2012 was 150, up from 115 in 2011.

The Dodd-Frank Bill, he said, remains a thorn in the side of the banking industry.

“We all agreed that we needed some sort of financial reform, but this has caused a lot of stress,” he said.

Brady said the “one size fits all” legislation has hurt small banks, he said, with 2,319 pages.

“Let’s put a mirror back on the U.S. government and have them go through the same process,” he said. “With its numerous and incomprehensible complexities, Dodd-Frank gives big banks competitive advantage over small banks, who are less able to hire lawyers and compliance personnel. We had to hire two and a half people just to keep up with the regulations.”

Banks, he said, have to implement and increase fees to offset revenue lost from regulatory overhaul.

“We are still running a business, still trying to make a profit,” Brady said.

He said banks are not trying to “gouge” customers; it’s the “cost of compliance.”

As for what’s going to happen in 2013, Brady said “I don’t know.”

The Dow, he predicted, would remain in the 10,500 to 14,500 range. Unemployment, he predicted, will remain at 7.5 to 8.5 nationally.

“To get to the target of 6.5 percent, we would have to create 280,000 jobs a month,” he said.

The federal budget was a sticking point, he said. The last time it was balanced was during the Clinton administration.

“In 1998, there was actually a surplus,” he said.

The U.S. Senate has not passed a budget in over three years and most likely will not produce one this year.

“I hope I’m proven wrong,” Brady said.

The 2,000-pages of Affordable Care Act, he said, will continue to unfold. The projected cost of $900 billion over 10 years, he predicted, will likely be much higher.

Yet there are “some good things,” he said. Parents can keep children up to age 26 on their plan and pre-existing conditions are covered, though both may increase the cost of premiums, he said.

“We need to tweak it,” he said.

If a company employs more than 50 people, there are issues.

“If you employ 200 people,” he said, health insurance costs about $1.5 million to provide. The penalties imposed for not providing health care cost $2,000 per employee, or about $400,000. So the company would save $1.1 million to drop the coverage and pay the fine.

This, he said, will cause a problem. Some restaurant chains are dropping fulltime employees down to part-time to avoid the issue, he said. Employers are required to pay 60 percent of the cost of coverage.

“Does anybody in this room have confidence in the government’s ability to set up the exchanges?” he asked. “Government has grown so exponentially, it will be challenging at best.”

Not in the bill, but needed, Brady said, was tort reform and the ability for insurance companies to sell insurance across state lines.

“Get yourself really informed about ObamaCare,” he advised.

The debt ceiling debate would continue because no one is willing to make difficult decisions, he said.

OC Home Bank president, Brady, delivers bright economic forecast

OC Home Bank president, Brady, delivers bright economic forecast

OC Home Bank president, Brady, delivers bright economic forecast

 

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