Inside Economic Forecasts

A collection of reports on the economy of the DC Metro area and how they relate to real estate.
There are 3 articles written on this subject. The most recent 10 are listed here:

NAR Economic Forecast More Real Estate Market Data NAR's Forecast Oct 12, 2005

You will find a complete Index of Articles by Category and by Month in the Archives.

January 8, 2006

The National Association of REALTORS® (NAR) recently published their forecast for 2006. A record real estate market? No. A melt down? No. "The real estate boon is showing signs of slowing" but, "what we are calling a slowdown is really a stellar market by any measure." They are saying because the US economy remains strong, we will have another strong market for real estate. Here are their forecasts:

National Averages	Inflation Rate	GDP	Jobless Rate	30 YR Fixed Rate	Appreciation Rate	Existing Home Sales	New Home Sales
2004	2.7%	4.2%	5.5%	5.9%	9.3%	6.8M	1.2M
2005*	3.4%	3.5%	5.1%	5.9%	12.4%	7.1M	1.3M
2006**	2.7%	3.8%	5.0%	6.5%	5.3%	6.9M	1.2M

*Estimated **Projected

In our local market, we might fair better than most See More Real Estate Market Data. We remain cautiously optimistic.

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December 14, 2005

I found this article published by David Howell, managing broker of the McLean office of McEnearney Associates, Inc. The snippet below is commentary about a presentation by Dr. Stephen Fuller, a noted professor of public policy and head of the George Mason University Center for Regional analysis, to the Northern Virginia Association of Realtors® Economic Summit in September.

We have often quoted Dr. Stephen Fuller of George Mason University, a true visionary about the DC economy. At the recent Northern Virginia Association of REALTORS® Economic Summit, Dr. Fuller focused on this area's incredible job growth as one of the major reasons to remain optimistic about the long-term health of our real estate market. As an example, the DC metropolitan area has created 287,000 net new jobs in the last five years - half of which were created in Northern Virginia. In just the last year, 84,500 new jobs have been created. And here's the real impact of those new jobs on housing: the jobs created 53,000 new households, but builders are only capable of building about 28,000 new housing units - homes, townhomes, condos and rental apartments - per year. Because of the shortage of affordable housing close-in, many of those new households have headed up and out - to the ex-urbs. Dr. Fuller projects a continued and growing shortage of housing units, and that long-term shortage will continue to mean good news for sellers. As long as we continue to see strong job growth, fueled first and foremost by the engine of federal spending (Northern Virginia gets half of every federal dollar spent in the region), we will continue to have a healthy real estate market.

Over the last 27 years, the average annual price appreciation in this region has been 6.9%. Both we and Dr. Fuller expect to see appreciation rates closer to that long-term average - perhaps 7% - 12% per year for the next decade.

Read the full article here. Also, download the Fuller presentation here (PDF file 840KB, for those that like the numbers before bedtime).

Dr. Fuller presents the numbers that back up the statements I made recently about the future of the Northern Virginia market driven by job growth and housing shortages.

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October 14, 2005

This just in from the National Association of Realtors® (no Bubble Talk here). These national averages and forecasts are not real meaningful if your current market is showing more than slight braking:

NAR’S Home Sales Forecast Looking Stronger

WASHINGTON (October 12, 2005) – The forecast for home sales has trended up as the year progressed, fueled lately by added demand resulting from the impact of recent hurricanes, according to the National Association of Realtors®.

David Lereah, NAR’s chief economist, said that at the beginning of the year it was thought that 2005 would be the second best total for both existing- and new-home sales, but by June it was apparent that another record was in the works. "Post-Katrina, our sales projections for this year have moved even higher," Lereah said. "Short-term momentum is very strong, and our Pending Home Sales Index just set a record. In addition to the housing needs of hurricane victims, we may be seeing some ‘fence jumping’ from home buyers who are getting into the market before interests rates move higher."

Existing-home sales are forecast to rise 4.2 percent to 7.07 million in 2005, while new-home sales are expected to increase 7.1 percent to 1.29 million. Total housing starts – single-family and multifamily – should be up 4.5 percent to 2.04 million units this year, the best showing since 1973, and single-family starts are seen at a record of 1.70 million...

"Inflationary pressures – driven by higher energy costs – have become a concern, so we anticipate two more hikes in the fed funds rate by the end of the year. In addition, long-term interest rates also are rising at a faster clip," Lereah said. The 30-year fixed-rate mortgage is projected to reach 6.2 percent in the fourth quarter, and trend up to 6.7 percent by the end of next year.

The national median existing-home price for all housing types is forecast to increase 12.5 percent in 2005 to $208,400, while the median new-home price should rise 3.9 percent to $229,700.

NAR President Al Mansell of Salt Lake City said some easing in home sales is expected in 2006. "The rise in mortgage interest rates is likely to have a slight braking action on the housing market, and the upside of that is it would help to bring the market closer to balance between home buyers and sellers," he said. "As a result, there should be a cooling in the rate of price growth – on balance, the overall market should continue to favor sellers with price appreciation remaining above the high end of historic norms. The investment fundamentals for housing remain solid."

In 2006, NAR expects the median existing-home price to grow by 5.2 percent and the median new-home price to rise 7.1 percent. Historic home-price gains are 1.5 percentage points above the rate of inflation, which is seen at 2.6 percent next year. "Although energy prices are the chief culprit in current inflation concerns, we project oil prices to settle early next year – that would cause inflation to quickly dissipate," Lereah said. The Consumer Price Index is forecast to rise 3.5 percent for all of 2005 before easing early next year.

Inflation-adjusted disposable personal income is expected to grow by 1.4 percent for 2005. The U.S. gross domestic product (GDP) is seen at 3.5 percent for all of 2005, with GDP picking up early next year as hurricane rebuilding accelerates. The unemployment rate is projected to average 5.2 percent for the next three quarters, then decline to 5.0 percent in the second half of next year.

View Charts (PDF File)

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