National Economic Outlook - September 2016

Written By:
Ingo Winzer, President

Local Market Monitor

What will it mean for real estate when the US economy slows down? That's not an academic question - we're seeing hints of slower growth already. The last recession was coupled with a real estate disaster, but my guess is that a slowdown this time will actually have no dramatic effects.

That's partly because mortgages and home building haven't provided much of a boost to the economy during this cycle, despite interest rates close to zero; so we don't have the artificial risk structures that came crashing down the last time. What we're most likely to see in a lower-growth environment is more of the same from the last few years: home prices still rising in some markets because there hasn't been enough new construction; prices stagnating in smaller industrial markets because people aren't moving there; and a continuing shift towards renting almost everywhere.

As our economy relies more on service jobs - and with computers doing what used to be management - the income gap increases and the attractiveness of home ownership decreases. A slower economy will mainly hasten those changes.

Jobs in August were up 1.7 percent from last year - part of the slowing trend. Jobs were up just 3 percent in construction (for construction, 3 percent is close to nothing), down slightly in manufacturing, up 1.8 percent in retail, 2.7 percent in business services, 3 percent in healthcare, and 2.5 percent at restaurants. Our leading indicator of growth - temp help services - was up 1 percent, we can worry when it goes below zero.