Stuggling housing market will drag on local economy

Slumping home prices in Massachusetts won't completely recover until at least 2013, according to a new economic forecast.

The forecast, released today by the New England Economic Partnership, a nonprofit group, said housing prices will continue to slide through this year, and recover only slowly. By the end of 2012, the state's median home price still will not have regained its 2005 peak, according to the forecast, which only goes through 2012.

The struggling housing market will remain a drag on the state's economy over the next few years, although the state's technology and knowledge-based services, such as consulting and scientific research, will keep Massachusetts from slipping into recession.

Growth, however, will be anemic, with Massachusetts projected to add just over 3,000 payroll jobs this year and about 10,000 in 2009. Over the next five years, job growth will average less than a half-percent a year.

In addition to housing, the weak, possibly recessionary, national economy will hurt growth in Massachusetts. Mark Zandi (right), chief economist at Moody's Economy.com in West Chester, Pa., said its unclear whether the US has entered a recession but "risks to the economy remain decidedly on the downside." The national economy is expected to continue to shed jobs in coming months, Zandi said. The US has lost jobs in each of the past four months.

In Massachusetts, job growth is expected to by led by education and health services, which includes hospitals and universities, and information, which includes software, will lead job growth through 2012, expanding at am average rate of 2 percent a year. Construction and manufacturing, however, will shrink at an annual rate of 1 percent during this period.
(By Robert Gavin, Globe staff)