By Brian Summerfield, Online Editor, REALTOR® Magazine
If attendees of NAR’s 2010 Leadership Summit were seeking some clarity around today’s “good news, bad news” economy, what they actually got was, well, good news and bad news. In an economic briefing this morning, NAR Chief Economist Lawrence Yun suggested there were reasons for optimism, but stopped short of saying that a recovery was right around the corner.
NAR Chief Economist Lawrence Yun
“I think we can anticipate moderate economic expansion,” said Yun, who predicted gross domestic product would increase by about 2 1/2 percent annually for the next few years. He also explained that no silver-bullet solutions seemed to be emerging to pull the economy out of the doldrums as quickly as in past recessions. “As a society, we’re static. We’re stuck.”
A big part of the problem is that while businesses are starting to bring in solid profits, they are conserving their capital instead of investing it, as they would in a more normal economy. This financial inertness is hampering the creation of new ventures and new markets, and the jobs that come with them.
Yun said a sustained, post-tax credit real estate recovery in the midst of slow growth would require two fundamental elements: substantial job creation and low interest rates. The good news, he added, is that average rates on conventional mortgages are at their lowest levels in at least a couple of generations, with 30-year fixed rates falling below 4.5 percent this week, and may not top 6 percent until 2012. The bad news is that unemployment remains high, and may not come down to “full employment” levels until the middle of this decade.
There are, fortunately, some bright spots in real estate right now. A few local markets are doing quite well — Buffalo, N.Y., for example, just hit its highest-ever average for home prices. Also, median home prices appear to have stabilized, thanks to the home buyer tax credit. (Data from NAR, the Case-Schiller Home Price Index, the FHFA, and CoreLogic all support this, Yun said.)
Still, there isn’t enough certainty regarding a general recovery to say for sure whether real estate will continue to slowly regain ground lost after the 2008 meltdown. All real estate pros can do in this market is focus on improving their own businesses, said Yun, who offered his own variation on 2011 President Ron Phipps’ theme for the Leadership Summit:
“Seize your market share.”