Real Estate Insider Blog

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20
Jun
2017

WHAT'S THE ECONOMIC FORECAST?

DENVER — “This is going to be the longest economic expansion in the post-World-War-II era,” stated Kevin Thorpe, the global chief economist at Cushman & Wakefield.

He was giving an assessment to a crowd of reporters at the National Association of Real Estate Editors conference, and the general message was one of growth — not risk.
 

Recession?

“The U.S. will not be going into recessions anytime soon,” Thorpe said.

“Recessions don’t just happen,” he added. “First we need to see imbalances somewhere in the economy — too much credit, too much exuberance in any particular sector.” Equity markets, oil prices, what the Federal Reserve does with interest rates and “wild cards” could change that, of course, but in general, Thorpe was confident that the economy is strong and will remain so for the immediate future.

“Of course there will be another recession at some point, and the next question becomes ‘What will the next recession look like?'”

In Thorpe’s opinion, it won’t look as gnarly as the last one. “It’s not likely to be nearly as severe as the one we went through in 2008-2009,” he noted. “Big recessions don’t happen very often; every 50 years seems to be the pattern. The next recession is probably more likely to be a traditional recession, with two to three quarters of job...

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02
Oct
2015

A MORE ROBUST YEAR FOR HOUSING IN 2015

BY Michael Neal


The National Association of Home Builders hosted an economic and housing outlook seminar at its International Builders' Show in Las Vegas inviting Frank Nothaft, chief economist at Freddie Mac, and David Berson, chief economist at Nationwide Insurance, to join David Crowe to discuss the outlook for 2015. Here are the highlights.

A strengthening labor market, low interest rates, improving mortgage availability and growing pent-up demand will help to significantly boost single-family housing production in the year ahead and move the housing recovery to higher ground.

Accelerating economic growth and employment gains are the primary factors that have helped consumer confidence jump back to pre-recession levels, according to NAHB Chief Economist David Crowe.

The signs point to a more robust year for housing. Household balance sheets are returning to normal levels, home owners' equity is increasing and significant pent-up demand is rising. More than 7 million existing home sales were postponed or lost during the downturn; and while some are lost forever, we should see some catch-up.

NAHB is projecting 993,000 total housing starts in 2014, up 6.7 percent from last year's total of 930,000 units.

Single-family production is expected to rise 26 percent in 2015 to 804,000 units. This is a good beginning, but is still well below a normal level of 1.3 to 1.4 million single-family starts.

On the multifamily front, NAHB is anticipating 358,000 starts in 2015,...

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23
Sep
2015

HOME PRICES STILL 2% UNDERVALUED

Relative to fundamentals, home prices nationally looked 2% undervalued in the fourth quarter of 2014. Home prices in 70 of the 100 largest metros are less than 10% over- or undervalued. That's the highest number of markets close to local long-term fundamentals since the recovery began, and a sign that the housing market is becoming more stable and healthy.

Trulia's Bubble Watch shows whether home prices are overvalued or undervalued relative to fundamentals by comparing prices today with historical prices, incomes, and rents. The more prices are overvalued, the greater the chance that a bubble might be forming. Sharply rising prices aren't necessarily a sign of a bubble. By definition, a bubble develops when prices look high relative to fundamentals.

Bubble watching is as much an art as a science because there's no definitive measure of fundamental value. To try to put numbers on it, we look at the price-to-income ratio, the price-to-rent ratio, and prices relative to their long-term trends. We use multiple data sources, including the Trulia Price Monitoras a leading indicator of where home prices are heading. We combine these measures of fundamental value rather than relying on a single factor because no one measure is perfect. Trulia's first Bubble Watch report, from May 2013,explains our methodology. This FAQ gives more detail for interpreting the results. Here's what we found this quarter.

Home Prices 2% Undervalued Nationally

We estimate that home...

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