Local Market Monitor, a preferred vendor of National REIA, recently released their National Economic Outlook for February where they say their “…assumption for the next three years is that growth in all local markets, with some exceptions, will no longer get better and better but will just continue at the current rate.”
National Economic Outlook – February 2017
February 16, 2017
By: Ingo WinzerHome prices are mainly determined by supply and demand, and a lot of the demand is tied to the economy. When the economy adds jobs, demand grows.
Our forecast of home prices in local markets estimates local economic growth over the next three years. Since the end of the recession, in about 2010, our forecast has assumed that all local economies will get better and better.
We’re now changing that assumption. The national economy hit a peak in 2015 and has since been growing at a steadily slower rate. Our assumption for the next three years is that growth in all local markets, with some exceptions, will no longer get better and better but will just continue at the current rate.
The effect on our home price forecasts isn’t very big. Nationally, the forecast for the next three years only drops from 17 percent to 14 percent, still a healthy increase. But the larger concern is the possibility that the economy is on a slide to slower and slower growth – which would affect demand more sharply.
Jobs in January were up 1.5 percent from last year; flat in manufacturing, up 1.4 percent in retail trade, up 2.3 percent in finance, 2.7 percent in business services, 2.4 percent in healthcare, 2 percent at restaurants, and up a half percent in government.
Jobs in truck transport were up 0.6 percent – not good; and temp jobs were up 3.1 – much better than in previous months.
About the Author: Ingo Winzer is President of Local Market Monitor, and has analyzed real estate markets for more than 20 years. His views on real estate markets are often quoted in the national press and in 2005, he warned that many housing markets were dangerously over-priced. Previously, Ingo was a founder and Executive Vice President of First Research, an industry research company that was acquired by Dun and Bradstreet in March 2007. He is a graduate of MIT and holds an MBA in Finance from Boston University. He resides in Cambridge, Massachusetts.
