ERIN EDGEMON, Business Editor
Posted: Sunday, January 11, 2009 8:01 am

Until consumer confidence rises, local experts say economic conditions won’t likely improve in 2009.

“Confidence is the key,” said David Penn, director of the Business and Economic Research Center at MTSU. “We don’t have it and we have to get it back.”

Consumers have slowed their spending and aren’t buying houses at the high rate of previous years as hundreds have lost their jobs over the past year and others are worried about their jobs’ stability.

“They don’t have the confidence they are going to have the income to pay the mortgage,” Penn said.

This trend is expected to continue at least until July, he said.

“I think for us to see the light at the end of the tunnel, we have to see improvement in home sales and construction,” Penn said.

Homes sales in the county dropped 30 percent in 2008 over the previous year, according to figures from the Middle Tennessee Association of Realtors

Residential building permits are down 43 percent from October 2007 to October 2008, Penn said. Permits are down to a nearly 20-year low.

John Jones, of John Jones Real Estate, expects the 2009 real estate market to mirror 2008.

Currently, the county has a more than eight-month supply of houses on the market, so most of the year will be spent balancing the market to a four-to-six-month supply.

Justin Holder, a real estate agent with Bob Parks Realty, said he is optimistic that the market will begin to improve by spring.

“Our No. 1 focus has to be moving what’s sitting right now,” he said. “Just like in a store that is oversupplied, we need to move what we have on the shelves before restocking. I am very optimistic, based on recent activity on my listings, that activity is starting to increase.”

Holder said first-time homebuyers aren’t buying, which is causing other segments of the market to become stagnant.

Despite reports that banks are having difficulty loaning money, Lee Moss, chief executive officer of MidSouth Bank, said “loan demand has remained very small.

“We are funding the majority of requests we receive,” he said.

And, Rutherford County will see more job losses before business conditions begin to improve.

“There is no doubt about it,” Penn said. “Those can easily stretch through this year.”

Since consumer spending is down, Rutherford County will likely see a slowdown in commercial development as well, he said.

More stores will close and fewer stores will open this year, Penn said.

Even the growth of medical services, which has driven development in the Gateway, Murfreesboro’s Class-A business district, will slow this year since consumers will have less money to seek these services, he said.

On the bright side, both Penn and Holly Weber, vice president of economic development for the Rutherford County Chamber of Commerce said Rutherford County and Middle Tennessee has a stronger economic picture that much of the country due to a diversified economic base.

“If you look at trends from previous recessions and economic slowdowns, Middle Tennessee traditionally is among the last regions to experience an economic slowdown and among the first to recover,” Weber said.

But when, exactly, the economy will recover is mostly just a guess.

“Whenever we start our recovery, it will be slower than any other economic cycle because of all of the consumer debt,” Moss said.

Erin Edgemon can be reached at 869-0812 and at eedgemon@murfreesboropost.com.