The 6th Annual Economic & Real Estate Forecast Symposium sponsored by New Orleans Metropolitan Association of REALTORS (NOMAR), the Commercial Investment Division (CID) of NOMAR, and the Louisiana Chapter of CCIM was recently held at Loyola University New Orleans, providing a stage for national and regional experts to share their insight and predictions about real estate markets and the economy. Following are a recap of the highlights of the symposium for our clients.
Developing Trend Line for Sales and Rentals
Rick Haase, the President of Latter & Blum Companies, spoke about the “Developing Trend Line for Sales and Rentals.” In 2016, home prices continued a gradual rise, but the turnover rate—the pace at which homes are selling—remains below average as the inventory of houses for sale remains lean. Nationally, the low inventory has resulted from drops in the number of foreclosures and short sales, as well as low rates of construction of single family homes. As a result, home prices have gone up. In New Orleans, lower foreclosures and short sales are contributing to lower inventory and higher prices.
Mr. Haase noted that the federal funds and interest rates are both expected to rise, as long as the economy continues to do relatively well with moderate growth. He did warn that interest rates might rise by a quarter of a point by the end of the year, with further increases in 2017. If that happens, other rates should increase, including mortgage rates, which he predicted might rise above 4% toward end of 2017. However, he still sees an extended period of low interest rates in comparison to the past.
In terms of demographics, Mr. Haase stated that the average age of first time homebuyers is 31 and that millennials, which make up the largest cohort, are starting to form households. He predicted that perhaps in the next five years or so, millennials will support home sales. Besides being the most educated cohort, they are much more racially and ethnically diverse than existing households, and he projects that three quarters of new households nationwide will be minority headed by 2025.
Mr. Hasse also discussed employment, noting that the jobless rate in New Orleans on August 16, 2016 was 6.2%, a rate that he asserted was affected by dollar and energy prices. He thinks the jobless rate will improve as energy prices rise.
Which Way are the National/Global Winds Blowing? Economic Forecast – U.S. Region and New Orleans
Adrienne Slack, the Vice President and Regional Director of the New Orleans Branch of the Federal Reserve Bank of Atlanta, provided an economic forecast for the U.S. and New Orleans. She explained that the Federal Reserve System is pursuing two objectives provided by Congress—maximum employment and price stability. The maximum level of employment is determined primarily by nonmonetary factors that affect the structure and dynamics of the job market. The Federal Open Market Committee (FOMC), the branch of the Federal Reserve Board that determines the direction of monetary policy, has chosen an inflation target of two percent year-over-year growth over the longer term.
Ms. Slack noted that the labor market has continued to strengthen and that growth of economic activity has picked up. Although the unemployment rate is little changed in recent months, on average job gains have been solid. Inflation has continued to run below the Committee’s two percent longer-run objective, partly reflecting earlier declines in energy prices and falling prices of non-energy imports. The FOMC currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will strengthen somewhat further.
While she claims that inflation is still a distance from its target, she noted that there are signs that wage pressures are finally picking up, which should begin to move inflation toward the FOMC’s objective. She continues to anticipate the economy will grow at a moderate pace—around 2 percent—in 2016.
Loyola Entrepreneurship Program
Jon Atkinson, the Director of the Loyola University Center for Entrepreneurship & Community Development, The New Entrepreneurs of New Orleans, gave a presentation on entrepreneurship in New Orleans. According to Mr. Atkinson, New Orleans leads the United States in the number of startups per-capita by 53%. Local companies that Mr. Atkinson said are worthy of keeping an eye on are KREWE du optic, Kickboard, locally.com, MobileQubes and TurboSquid.
He also noted the explosion of co-working spaces in New Orleans. Co-working spaces are office spaces where people, who are usually self-employed, occupy the same space and share equipment, ideas, and knowledge with others who are also self-employed. Those include Landing Zone NOLA, The Shop, Launchpad, Propeller and The Warehouse to name a few. He explained that the benefits of such spaces are that they are affordable, flexible and beneficial for networking, and provide a connection to the community.