ECONOMIC OUTLOOK Over twenty years of proven expertise and trend analysis in evaluating residential property values. |
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To help our customers better understand current market conditions and projections, Local Market Monitor provides periodic analyses of national economic trends and their impact on real estate markets. This analysis, developed by Ingo Winzer, reflects his view on the current outlook for the national economy. National Economic OutlookAugust 26, 2009 Although the recession may technically be over, nobody except economists has noticed. The unemployment rate remains high, consumer spending remains low and 6 million jobs were lost last year. Delinquency rates are 9 percent on mortgages and 8 percent - climbing rapidly - on commercial real estate loans.
A recovered economy, once we get one, will look different than the economy we had just a few years ago. The only sector of the economy that's currently growing is health care, where 300,000 jobs have been added. Meanwhile, with manufacturing jobs down sharply and industrial production at the lowest level since 1998, it's likely that the manufacturing sector will be permanently smaller.
The business services sector will snap back fairly quickly, but government and construction will take longer to revive. By government, I don't mean federal government spending, but government jobs, and mainly at the state and local levels. With tax revenues sharply lower, state and local governments will be adding few jobs in the next few years.
Construction will be moribund for an even longer time, because the US still has an excess of about 4 million homes. Construction levels have dropped to 500,000 new homes per year - from more than 2 million during the boom - but it will still take four or five years to work off an inventory of that size.
Although the recovery will be a drawn-out affair, we are finally seeing an essential component of a recovery in consumer spending: a fall in consumer debt. Until very recently, consumer debt remained near the record level of 2008, possibly because consumers who lost their jobs and income used up their credit cards instead. But debt has fallen rapidly since the start of 2009 and is down 4 percent in the last year. We think this will continue and are sticking with our forecast that spending will pick up in mid-2010.
We foresee a 5 percent drop in the average US home price in the next year, including double-digit decreases in large markets like Phoenix, Miami and Las Vegas. But many Texas markets should see modest price increases, and we think Washington DC and Anaheim will stabilize. ARCHIVED OUTLOOKS
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