There is a constant stream of economic data available for review and it’s always fascinating to hear various economists’ viewpoints. However, a recent overview from the Local Market Monitor, a noted real estate industry analyst, seemed to sum up the current outlook quite succinctly. Here is an excerpt highlighting the strong relationship between the real estate market and the continuing economic recovery.
According to the Local Market Monitor, “until the elections are over, all economic news will be dissected and presented as supporting one political view or the other, even the smallest details. But the reality is that economic growth will continue at the same modest pace of the last six months.
The economy grew 2.2 percent in the first quarter, slower than the 3.0 percent of the fourth quarter mainly because there was less buildup of inventories. Most encouraging for real estate markets is that consumer spending was up 3 percent and homebuilding was up 19 percent; meaning that the economy has legs and is finally leading to new home buying. There are still large pools of vacant homes left over from the building binge but in many markets the excess inventory has been mopped up.
Retail sales for the first quarter show an 11 percent increase at furniture stores and a 14 percent increase at building materials stores, not yet a recovery from the deep decreases of the recession but good evidence of renewed consumer interest in housing.
Jobs in April were up a modest 1.3 percent from last year, and the unemployment rate slipped down to 8.1 percent.”
The recovery keeps marching on, and according to the Local Market Monitor, they predict to see more of the same in coming months. Their focus regarding the statistics in the past six months is that they’re consistent – not seeing jobs up one month, down the next, or car sales strong in January, weak in February. It’s a real recovery.
The Local Market Monitor Housing Demand index, which went into Contraction in mid-2006 and stayed there for 64 months, has finally switched to Expansion. This index is tied to hiring by single-family home builders, mainly small operators who are very sensitive to demand in their local market. Their prediction is for unusual housing market for the next couple of years, where foreclosures and vacancies continue at the same time as new construction grows rapidly.
Andy Warren is President of Maracay Homes, the Arizona subsidiary of the Weyerhaeuser Real Estate Company. He serves on the Board of Directors for the Homebuilders Association of Central Arizona; the Board of Directors and as an Executive Committee member with the Greater Phoenix Economic Council. He is also an active member of the Urban Land Institute.