Yesterday was the Spring Economic Update 2011 for NVAR and as usual, it was chock full of information on not only the national economy but the local economy as well. The featured speaker was Dr. Stephen Fuller and he gave his insight into what could expect on our way out of the recession and on the road to recovery.
35% of the local economy is the federal government but it is not driving our growth as it did from 2000-2010 when it was a much larger factor.
The remaining 65% of the economy is driving our growth even though it doesn’t have the bank roll of the gov’t it is still good. We can’t print money like the federal government.
Still a jobless recovery – efficiency and technology recovery – more productive workforce and is stronger than everyone expected. We are on track for a recovery for similar to 1991 – 52,000 jobs lost in 2009 we lost 50,000 but tracking in terms of GDP in the 2009 recession.
Differences 1/3 GDP was manufacturing – today is 10% of GDP; Global Economy today; flexible workforce – people work from home; Stimulus money helped us as well; Expansion is wide spread & broad based – educ/health, professional & business serv, leisure and hospitality, and manufacturing are leading the way.
Credit card debt is up 2 months in a row – savings are down as well. People are spending – consumer confidence is up – February not as bad as last year in terms of weather so people were out spending.
Manufacturing up 19 consecutive months – non manufacturing up 17 months – these are both better than expected. New orders continue to come in as well.
We are doing same amount of work with 8,000,000 fewer workers since recession began. ¼ of workers have been re-employed then unemployed again. Unemployment numbers are down and are coming down faster than expected but may be misleading. Unemployment is at 8.9% now was at 9.5% at the beginning of the year and is projected to be 8.8% by the end of the year.
Consumer’s perspective on the economy – they believe future is better than the past and are close to optimistic but the present situation is not as good as expectations.
New home sales, although at near historic lows, are on the road to recovery. Next year will be better and their increases will come in the last quarter of this year.
Federal Reserve is expected to increase the Fed Rate by ¼% and as a result, mortgage rates will increase. Expect rates to remain low through the fall buying season then increase after that time frame.
Energy prices, taxes, and rates are all going to go up. Oil prices will rise – payroll taxes will go up – interest rates are going up as well.
No big bubbles on the horizon in the economy.
Locally, we are in recovery with a good trajectory and gaining altitude.
Jobs are coming back but not as much as was predicted by the labor bureau. January was strong for job growth. We have gained the most jobs out of the top 15 markets – Washington area and Boston are the only 2 markets to increase and we doubled them in creation of jobs. This January was the first January in we did not lose jobs in the construction sector. Over 40,000 jobs were lost in this sector alone. We have 4.7% unemployment rate in NOVA – Arlington is 4.3% and is the lowest in the state. Non-local service businesses will help pick up the slack of the government not expanding. These are businesses are businesses that don’t need to be here but want to be here – not tied to the government.
The economy is expanding without the aid of housing – 19% of GDP is the housing sector and all that goes along with it. Typically housing is the juice that fueled the recoveries in the past – this recovery will not see housing contribute until 2012/2013 – we saved the best for last. Pent up demand in move up market will help drive the recovery in the future. NOVA is driving the housing recovery locally. If we average 6%, which is predicted, then we will get our numbers/values back in 3 years.
Forecast and challenges in 2011 for housing
- Low consumer confidence – fear about jobs/economy
- More difficult lending processes
- Lack of urgency
- Foreclosures remain in some jurisdictions
- Shift in housing preference – will affect builders more than re-sales but buyer’s preferences will dictate what will sell
- More apartments will be built – a few condo projects are on the horizon – new builds will enter market near the end of the year, beginning of next year
We have a shortage of housing – 705,000 jobs are needed to fill the demand we have in our area which is 220,000 households that we will need that we don’t have currently. The future is bright for us in housing. Public policy will be our challenge – gov’t wants the jobs but not the houses because houses mean police/fire & rescue, schools, etc.
Policy-cra.gmu.edu is where you can find PowerPoint slides
It is more important now than ever to stay up to date and informed as the market continues to evolve. More changes are on the horizon with Fannie Mae and Freddie Mac, pricing, short sale reforms and much more I am sure so read, attend seminars and go to trainings. Get it? Got it? Good!
Now, go sell something!