Sunday
April 20, 2014

Economy Heats Up

|
-A A +A

Economy Heats Up

Affordability is expected to take a hit next year as home prices and interest rates continue to head up.

The upbeat real estate market news we received in 2013 presents some challenges for the year ahead. An influx of buyers last year helped strengthen housing appreciation, which in turn led to greatly improved consumer confidence. The result was 5.1 million home sales, the best year for real estate purchases since 2007.

But 2014 will be different, with sales volume gains expected to be small at best, because of rising interest rates and home prices, NAR Chief Economist Lawrence Yun says. But there’s an upside, too: the continued growth in the economy, which, while modest, has stayed on track. The resulting addition of more than 2 million jobs each year should provide a boost to housing markets. On the commercial side, rising rent growth and declining vacancy rates bode well for the office, industrial, retail, and multifamily sectors.

Yun says lenders could promote stable markets next year as they look to purchase-money mortgage loans as their next big growth area to compensate for a shrinking body of business from refinances, which will drastically fall as interest rates rise.

 

 

2013

2014

2015

Forecast

 

 

 

GDP growth

1.8%

2.5%

2.7%

Existing-home sales (millions)

5.11

5.14

5.40

New-home sales (units)

433,000

522,000

680,000

Housing starts (units)

917,000

1,126,000

1,450,000

Home price (median)

$196,700

$207,200

$215,000

Fed funds rate

0.1%

0.1%

1.5%

30-year mortgage

4.0%

5.1%

5.8%

 

Commercial

Office

 

 

 

Vacancy rate

15.7%

15.5%

15.4%

Net absorption (sq. ft.)

32,197

46,144

49,634

Completions (sq. ft.)

27,314

35,613

42,065

Rent growth

2.4%

2.5%

3.0%

 

 

 

 

Industrial

 

 

 

Vacancy rate

9.3%

8.8%

8.4%

Net absorption (sq. ft.)

97,027

104,913

107,469

Completions (sq. ft.)

48,996

67,061

68,507

Rent growth

2.4%

2.5%

3.0%

 

 

 

 

Retail

 

 

 

Vacancy rate

10.5%

10.1%

9.9%

Net absorption (sq. ft.)

10,968

18,093

22,683

Completions (sq. ft.)

6,008

13,409

17,526

Rent growth

1.4%

2.2%

2.3%

 

 

 

 

Multifamily

 

 

 

Vacancy rate

4.1%

4.0%

4.2%

Net absorption (units)

239,443

211,325

102,343

Completions (units)

123,518

163,924

114,697

Rent growth

4.0%

4.3%

3.5%

 

Home affordability hits peak

 

No longer a depreciating asset

(annual index level)

(median home price)

2006

107.6

2006

$221,900

2007

115.4

2007

219,000

2008

137.8

2008

198,100

2009

169.4

2009

172,500

2010

172.0

2010

172,900

2011

186.4

2011

166,100

2012

196.5

2012

176,800

2013

164.3 (Sept. only)

2013

196,800

 

 

Back to work

Profitable lenders

(one-month net job gains, May of each year)

(banking profits, in billions of dollars, second quarter of each year)

2006

135,895

2006

$407.3

2007

137,612

2007

297.6

2008

137,446

2008

158.1

2009

130,985

2009

216.4

2010

130,224

2010

288.6

2011

131,284

2011

284.6

2012

133,522

2012

375.1

2013

135,688

2013

429.8

 

 

0
No votes yet
Your rating: None