WATERLOO - Black Hawk County's economy wasn't exactly hitting on all cylinders in the second quarter of 2008.

Of the economic indicators regularly tracked by the Courier, three showed improvement from a year ago, three were in decline and two were a toss-up.

However, there's a silver lining behind some of those economic clouds. Real estate is one of them.

While home sales were down for the quarter ending June 30, the county enjoyed its best July in more than seven years with 281 home sales.

And, while sales and listings were down for the second quarter, average and median sales prices still showed improvement from a year ago - indicating the market is still holding its own.

"Part of our problem is we just don't have enough inventory," Waterloo-Cedar Falls Board of Realtors executive Bob Reisinger said. There's a shortage of homes on the market below $150,000.

"When a listing comes on the market in that price range, they're gone," he said.

Some people have been afraid to list their homes, thinking the market is soft.

"And it really isn't," Reisinger said.

Contrary to national trends, " the prices are holding and actually still going up," he said. "Then, you add the floods and the tornadoes. People are still recovering from that. Some of those might be potential buyers."

While sales are running slightly behind last year, Reisinger says he is anticipating a strong second half of the year.

"People just have to get some confidence back that the market is still good," he said.

Also, while the total dollar value of new construction activity was down 7 percent for the quarter, the number of building permits issued was up 13 percent for the quarter, and Cedar Falls and Waterloo finished the first- and second-highest fiscal years, respectively, in construction activity in each of their cities.

Construction of the Target Corp. cold storage addition to the Target Distribution Center warehouse was the major project in Cedar Falls, while residential additions and remodelings remained strong.

As new home construction leveled off in the fourth quarter in Cedar Falls, the number of permits issued for residential additions and alterations shot up more than 60 percent for the quarter ending June 30 over a year ago.

The total dollar value of those projects increased from roughly $2.7 million to $4.7 million.

Cedar Falls saw permits issued for 47 new homes during the second quarter, at a total value of more than $11 million, or roughly $235,000 a house. Waterloo had permits issued for seven new homes with a total value of about $864,000, or about $123,000 a house.

The most positive indicator for the quarter continued to be employment. According to Iowa Workforce Development, there are now more than 90,000 people working in Black Hawk, Bremer and Grundy counties, which make up the Waterloo-Cedar Falls metropolitan statistical area, according to the state. That's the highest total in at least the past five years. Also, the total labor force has increased by more than 3,000 workers over that time, and average unemployment for the quarter was at 3.7 percent. up slightly from the same quarter a year ago but down significantly from the 4.4 percent average jobless rate for the second quarter of 2004.

Among other positive signs, residential utility connections remained up from a year ago, possibly tracking the workforce gains. Also, local financial institution deposits remained high, perhaps reflecting a trend toward more conservative forms of investment in response to a fluctuating stock market.

Auto registrations remained down, perhaps reflecting a general slowdown in the auto industry; bankruptcies were up slightly; and airline passenger boardings at the Waterloo Regional Airport were down 6 percent, as rising energy prices constrained travel.

Adverse weather also played a factor and "caused a very high number of cancellations," airport director Brad Hagen said.

Contact Pat Kinney at (319) 291-1426 or Pat.Kinney@wcfcourier.com