The Economic Forecast for 2012 Said WHAT?!
At the beginning of every year, I have the opportunity to see a couple of different economic forecasters speak at different associations that I belong too, which is always something I attend because we all know that knowledge is power. Even though these forecasts are based on results from previous years, current market conditions and they can’t take into account any unforeseen situations, like natural disasters and outside influences (like the debt crisis in Europe), I like to get a feel for the general atmosphere of the economy so that I can plan for the year appropriately.
The first forecast that I attended, was provided by Professor James W. Hughes, renowned economist and head of the Economics Department at Rutgers University. Here are some of the highlights that I took away from Professor Hughes’ presentation:
- NJ saw the most job growth in 2011 since 2000 – this is very promising, right?!
- Our state is also seeing a rebalancing of private and public sector jobs, however, local government jobs grew, while state and county level jobs were shed
- Every public job is balanced out with 22 private sector jobs
- Added 47k private and shed 20k public jobs at state level while local grew slightly
- The recovery will continue in NJ and will track closely to the national recovery
- External factors make us vulnerable and our recovery is dependent on those factors
- Our housing recovery for production starts will be 2-3 year longer
The second forecast, was the very next day, and presented by Patrick O’Keefe of J.H. Cohen, LLP, who specializes in the housing market. His information was geared toward the real estate marketing in NJ. Some of the highlights from Mr. O’Keefe’s forecast are actually a review of the past:
- We have seen some improvement in the National housing market but it’s taking a long time because of external factors, debt burdens, fiscal imbalances and financial re-regulation.
- Economy will grow slower for the next two decades than it has in the past.
- Household net worth is 14.1% less than it was in 2007.
- Damage was done in the real estate and mortgage areas due to home values declining 25.1% with the value of the mortgages being down only 3.1%.
- Construction accounts for 3% of NJ’s GDP.
- 1/4 of the missing jobs in NJ is in the construction industry.
- Homeownership is declining in NJ and the country.
Where we came from sounds pretty dismal (and I’ve only selected some of his points from my notes to share with you). But don’t despair; he had some promising information on the future:
- General demand for housing exists.
- Prices are back to where they were in the middle of 2004 and new home prices increased more than resale prices.
- Mortgage rates are at the lowest level ever and the fed plans on staying the course for the time being.
- The affordability index is extremely high which means the fundamentals are all positive for the housing market.
- As we go forward in 2012 the first half will be different than the last half and he’s predicting that we will resolve some of the issues with foreclosure and jobs.
- The second half of the year will see the market rationalize and become more conventional and rates will remain accommodating.
- Building activity will increase particularly in the multifamily arena.
- Construction permits will be up around 15 - 17% which will be above the lowest amount ever in 1997 by about 50.
- Construction financing in multifamily will be more readily available.
Please keep in mind that I’m sharing some of the notes that I took during these presentations and that I can in no way replace the entire presentation from both of these renowned economists, but I wanted to share some of the hope for our economic future that they both agree will be slow. In my book (and the famed story of the tortoise and the hare), slow and steady wins the race!
For more information on the economic forecast for 2012 check out this webinar by NAHB CEO Jerry Howard, Chief Economist David Crowe and Senior Vice-President for Government Affairs Jim Tobin. They take a look at the association's plans for the year, the economic forecast and how the upcoming elections will shape the policies that affect homeownership and the housing industry.
Watch Here