IREM Forecast: Sideways Is The New Up
Friday morning I woke up at the crack of dawn (and skipped hockey the night before too) to attend Seattle’s Institute of Real Estate Management’s (IREM) 25th annual forecast breakfast.
The keynote speaker was Dr. Arun Raha, the Executive Director and Chief Economist for the State of Washington.
He kicked things off pointing out that we’ve been in the worst recession since WWII but that fortunately we’ve been out of the recession since June 2009 with GDP and real consumer spending growing modestly for the last five quarters (mainly because of gains in productivity). However, the big problem is that with this recession we’ve lost 8.5 million jobs and have only made up 1 million so far. This is the largest job loss we’ve seen and with such a huge jobs deficit we need to grow above trend in order to dig ourselves out. At 39,000 new jobs in November, instead of 300,000 jobs a month it is going to take us a while though. Especially since credit for small business is improving but still tight making it hard for them to create more jobs. But don’t worry, the yield curve has flattened so it is unlikely we’ll double dip, remodeling activity is going strong and car sales are moving in the right direction. Whew.
Getting local, for the state of Washington, employment growth since the trough has been slowest for this recession and we’re 177k jobs in the hole. It will take us until April 2013 for us to regain our lost jobs. The three bright spots here are that exports are up, Boeing has a healthy and diversified order book (but upside is limited because they haven’t laid off as many people as past recessions), and software employement is growing and expected to grow at 5%.
In terms of real estate, non-residential construction, he’s not expecting a recovery until 2012 and for residential real estate we’ve paid back the pull forward from the tax credit. Something hampering us is that immigration is being constrained by people not being able to move because they’re unable to sell their homes. The good news is that prices are bumping along the bottom and we should see a multi-family construction recovery in 2011.
Dr.Arun Raha concluded that the economic recovery is ongoing but at a closer anticipated pace. The level of uncertainty continues to remain high and the downside risks still remain higher than upside risks. He’s predicting that state revenues will be at 2006 levels in 2012.
The second half of the morning was a panel discussion which I was unable to stay for but Aubry at the Seattle PI has a write-up on it, Seattle well-poised for recovery, in some areas, eventually. Seattle Rentals also Tweeted up a storm.