For a real estate investor to make any fiscally astute investment decisions, it is critical for him take measure of the future economic outlook where he chooses to invest. What will come in future bring? What will the cost of money be tomorrow? Which cities and neighborhoods where we put our money will most economically robust? Can we assume future housing appreciation?
Last month I had the pleasure of listening to a pair of widely respected economists- Anil Puri, Dean of the College of Business and Economics at California State Fullerton and David Lereah, Chief Economist Of the National Association of Realtors- give their view on the future economy of the United States.
Let me summarize:
· The economy will grow. The expansion rate (Gross Domestic Product) of 3.0% to 4.1% that the US Economy has been enjoying will continue at the 3.3% to 3.4% level through 2009. National economic fundamentals are sound but inflationary pressures, rising oil prices, tax reform, and potential job losses could be risks on the horizon.
· We will pay more. Both economists predicted inflationary times ahead. The Consumer Price Index (CPI) last week rose an annualized 4.8% nationally and 5.7% for California. The end of year rate will end up closer to 3.5% and probably 1 point higher for California.
· We will make more. In 2006-2007 an average of 6.2% rise in personal incomes is predicted. Rising incomes employers pay to attract better workers will make housing in economically dynamic cities more affordable.
· There will be more of us. By 2050, America's 290 million population will be 420 million strong. Nevada's population will grow two fold by 2023; Florida's population will double by the year 2040. California will add the most residents, but the greatest percentage increase will be in Texas, Florida, Nevada and Arizona
· We will build more. Ninety million new housing units by 2050 are needed to replace older housing stock, to house new households and to satisfy the demand for the burgeoning 2nd home market.
· We will have immigrants. Miami, Los Angeles and New York will continue to attract the large families 1st generation immigrants traditionally provide. We will need their vitality and work ethic.
· We will age. Twenty five years ago, only 25 million Americans were above the age of 65. That number will almost triple to 70.3 million by 2030.
· We will pay higher interest rates for all loans. Besides credit card companies finding ways to charge higher rates, the Federal Reserve has raised short term rate 12 straight times since June 2004. Prime interest rates on most Home Equity Lines of Credit (HELOCS) have risen from 4% to 7% during that time. The Prime Rate is expected to be at 8% by the end of 2006. Both economists forecast long term fixed rates to be about 6.5% to 7% by the end of next year.
Those of you that now have loans with long term fixed rates will benefit in a higher rate world. Call me if you want to avoid the risk of higher interest rates.
Would you like to know why I think we won't recognize the place 10 years from now? E-mail me if you would also like to know where Dr. Lereah, National Association of Realtors economist, saw the young, energetic high-tech swing cities growing the most.
post courtesy of Steve Dexter
949-494-1676
Last month I had the pleasure of listening to a pair of widely respected economists- Anil Puri, Dean of the College of Business and Economics at California State Fullerton and David Lereah, Chief Economist Of the National Association of Realtors- give their view on the future economy of the United States.
Let me summarize:
· The economy will grow. The expansion rate (Gross Domestic Product) of 3.0% to 4.1% that the US Economy has been enjoying will continue at the 3.3% to 3.4% level through 2009. National economic fundamentals are sound but inflationary pressures, rising oil prices, tax reform, and potential job losses could be risks on the horizon.
· We will pay more. Both economists predicted inflationary times ahead. The Consumer Price Index (CPI) last week rose an annualized 4.8% nationally and 5.7% for California. The end of year rate will end up closer to 3.5% and probably 1 point higher for California.
· We will make more. In 2006-2007 an average of 6.2% rise in personal incomes is predicted. Rising incomes employers pay to attract better workers will make housing in economically dynamic cities more affordable.
· There will be more of us. By 2050, America's 290 million population will be 420 million strong. Nevada's population will grow two fold by 2023; Florida's population will double by the year 2040. California will add the most residents, but the greatest percentage increase will be in Texas, Florida, Nevada and Arizona
· We will build more. Ninety million new housing units by 2050 are needed to replace older housing stock, to house new households and to satisfy the demand for the burgeoning 2nd home market.
· We will have immigrants. Miami, Los Angeles and New York will continue to attract the large families 1st generation immigrants traditionally provide. We will need their vitality and work ethic.
· We will age. Twenty five years ago, only 25 million Americans were above the age of 65. That number will almost triple to 70.3 million by 2030.
· We will pay higher interest rates for all loans. Besides credit card companies finding ways to charge higher rates, the Federal Reserve has raised short term rate 12 straight times since June 2004. Prime interest rates on most Home Equity Lines of Credit (HELOCS) have risen from 4% to 7% during that time. The Prime Rate is expected to be at 8% by the end of 2006. Both economists forecast long term fixed rates to be about 6.5% to 7% by the end of next year.
Those of you that now have loans with long term fixed rates will benefit in a higher rate world. Call me if you want to avoid the risk of higher interest rates.
Would you like to know why I think we won't recognize the place 10 years from now? E-mail me if you would also like to know where Dr. Lereah, National Association of Realtors economist, saw the young, energetic high-tech swing cities growing the most.
post courtesy of Steve Dexter
949-494-1676
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