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Economic Forecast: Expectations High, but Less Long-Term Optimism

Apr 22, 2018 by

The latest Urban Land Institute (ULI) Real Estate Economic Forecast predicts modest fluctuations across the board for 27 economic/real estate indicators. The three-year forecast is completed semi-annually, surveying over 48 economists and analysts at 36 real estate organizations.

A leading concern? Rising interest rates. ULI forecasts interest rates to be 0.4 percent higher in 2018 and 2019 than previously estimated. The 10-year U.S. Treasury rate is also expected to rise, to 3.1 percent in 2018 and 3.4 percent in 2019, and then stay flat in 2020.

However, according to a recent ULI webinar—featuring Mark Wilsmann, managing director and head of Equity Investments at MetLife Real Estate; Martin Stern, senior managing director at CBRE; Richard Barkham, global chief economist at CBRE; Diana Reid, executive VP at PNC Financial Services; and Stuart Hoffman, senior economic advisor at PNC Financial Services—economists are not as optimistic for the long term.

“After 10 years of negative interest rates, that monetary tightening is happening in both U.S. and China,” said Barkham. “I think it will slow a little bit more than in these forecasts. Because there is more debt in the global economy than prior to the financial crisis, there is some downside risk after mid- to late 2019. On balance, I would take a little bit more of a pessimistic view after 2019.”

With rising rates incentivizing buyers to act fast, housing shortages will continue to prove a challenge. ULI’s forecast has 2018 single-family housing starts pegged at 923,000 homes—lower than the previous estimate—with an increase to 987,500 starts in 2019 before falling off to 925,000 in 2020. Hoffman believes multi-family homes are more at risk, as millennials are aging and looking for properties that they can better afford.

While new construction or redevelopment projects could ease the growing stress on the market’s low inventory, a shortage in workers and rising costs for building materials are impeding the effort.

“There’s less construction financing and less interest in doing new development deals for both cost and financing rationale,” said Reid. “Every lender and every development is looking at demographic changes, city changes…what is going to be the demand? How much rental, how much for sale housing, how much office space, how much industrial?”

Hoffman believes that job growth is a key driver in demand and companies are “facing a war for talent.” Reid echoed his sentiments, and also believes the search for top talent will impact the rental market.

“Costs of construction are going up and getting worse, and there’s a focus on how to solve that,” Reid said. “The size of the population that is looking for rental housing at affordable rates so they can have a good, clean place to live when they get the job, and become part of a growing workforce, is really at a crisis moment, and there will be more of a focus on that.”

ULI’s forecast expects job growth to fluctuate in 2018 and 2019, rising up to 2.2 million new jobs the first year and only 1.89 million the following year. Long-term optimism is low—ULI predicts 2020 may see a drop off to only 1.38 million—but still above the long-term average.

Real GDP growth runs along the same vein, forecasted to increase to 2.8 percent in 2018 (above October’s 2.4 percent prediction) before dropping to 2.5 percent in 2019 and 2 percent in 2020. Predictions can change, however, as the U.S. economy has multiple influencers, including the current political climate—pending trade conflicts, the new spending bill and the new tax law have already impacted predictions since the last survey.

“The tax cut has set the seeds for the next two or three years,” said Stern. “We’re on a sugar high–every forecast is a little better than it was before—but with that, it’s clear we’re not going to get the kind of growth rates that are not going to have increases in debt. There’s a little bit more upside risk toward interest rates that could tend to slow the economy in 2020, not a lot of cap rate appreciation in property, and we need an infrastructure program that doesn’t add to the deficit. The forecast is right, but I’m seeing a little more upside risk than others are seeing.”

Dominguez_Liz_60x60_4cLiz Dominguez is RISMedia’s associate content editor. Email her your real estate news ideas at ldominguez@rismedia.com. For the latest real estate news and trends, bookmark RISMedia.com.

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Buyers Have High Hopes for Spring

Mar 25, 2018 by

Getting Equipped to Win

Buyers are flocking to the market this spring, with high hopes even as they face a frenzy of multiple-offer situations, according to new realtor.com® research.

Currently, inventory is down 8.5 percent year-over-year. In addition to the buyers out in droves for the first time, many have been on the hunt for a while. In fact, 40 percent of buyers have been looking for more than seven months; another 34 percent have been searching for four to six months. Moreover, 35 percent are anticipating “a lot” of competition this season.

“We’re only a few weeks into March and already seeing the market heat up,” says Danielle Hale, chief economist for realtor.com. “Holdover buyers hoping for greener pastures this spring are likely to find sparse options that require them to pay top-dollar or make other concessions.”

To combat competition, buyers are employing strategic tactics, like checking in daily on listing portals and getting notifications about prices, as well as above-asking offers and having a down payment higher than 20 percent.

“The majority of buyers are aware of the tough competition they’re up against this spring,” Hale says. “Having been in the market awhile, they’ve likely lost a few homes to better offers, which has given them more time to save and up their bidding strategies.”

Even against hurdles, buyers are optimistic—an impressive 60 percent believe they will close in the next six months, and 34 percent believe they will close in four to six months.

The data comes from more than 1,000 responses to a survey by Toluna.

For more information, please visit www.realtor.com.

DeVita_Suzanne_60x60Suzanne De Vita is RISMedia’s online news editor. Email her your real estate news ideas at sdevita@rismedia.com. For the latest real estate news and trends, bookmark RISMedia.com.

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10-Year High Profits for Sellers

Feb 4, 2018 by

Homeowners are profiting when selling—and their average earnings haven’t been this high since 2007.

At the close of 2017, the average home seller gained $ 54,000, or a 29.7 percent return on investment (ROI), in the transaction, according to ATTOM Data Solutions’ recently released Year-End and Q4 2017 U.S. Home Sales Report. Contradictory, however, is their length of stay: 8.18 years—the longest since 2000.

“It’s the most profitable time to sell a home in more than 10 years, yet homeowners are staying put longer than we’ve ever seen,” says Daren Blomquist, senior vice president at ATTOM Data Solutions.

The best rates of ROI are clustered on the West Coast, the report reveals. The San Jose, Calif., market has the highest return, at 90.9 percent, followed by San Francisco, Calif., at 73.7 percent, Merced, Calif., at 64.6 percent, Seattle, Wash., at 64.4 percent, and Santa Cruz, Calif., at 59.8 percent.

Appreciation, generally, improves the potential for profit. Annual appreciation has been highest in Ocala, Fla. (+14.3 percent), Kansas City, Mo. (+13.4 percent), San Jose (+13.3 percent), Salem, Ore. (+12.9 percent), and Nashville, Tenn. (+12.5 percent), the report shows. Additional areas are considerably growing, as well: Las Vegas, Nev. (+12.3 percent); Salt Lake City, Utah (+10.9 percent); Seattle (+10.8 percent); and Orlando and Tampa-St. Petersburg, Fla. (both +10.7 percent).

“While home sellers on the West Coast are realizing the biggest profits, rapid home price appreciation in red state markets is rivaling that of the high-flying coastal markets and producing sizable profits for home sellers in those middle-American markets, as well,” Blomquist says.

Source: ATTOM Data Solutions

DeVita_Suzanne_60x60Suzanne De Vita is RISMedia’s online news editor. Email her your real estate news ideas at sdevita@rismedia.com. For the latest real estate news and trends, bookmark RISMedia.com.

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Confidence in Housing Doubles Back Toward All-Time High

Sep 10, 2017 by

Confidence in housing doubled back in August toward the all-time high in the Fannie Mae Home Purchase Sentiment Index® (HPSI), with home sellers’ optimism rebounding from July. The HPSI overall posted 88.0 in August, 1.2 percentage points higher than the month prior and moving toward the Index’s record high, reached for the second time in June.

The share of homebuyers surveyed for the Index who believe now is a good time to buy fell five percentage points to 18 percent, but the share of sellers surveyed who believe now is a good time to sell rose eight percentage points to 36 percent. The discrepancy is predominantly due to home prices, says Doug Duncan, chief economist and senior vice president at Fannie Mae. Forty-eight percent of both homebuyers and sellers surveyed anticipate home prices will rise.

“In the early stages of the economic expansion, home-selling sentiment trailed home-buying sentiment by a significant margin,” Duncan says. “The reverse is true today. The net good time to sell share is now double the net good time to buy share, with record high percentages of consumers citing home prices as the primary reason for both perceptions. Such a sizable gap between selling and buying sentiment, if it persists, could weigh on the housing market through the rest of the year.”

Source: Fannie Mae

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