Nov. 2015-Opportunity Knocks

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14 | Th e M Rep o RT take 5 Econ Pro Weighs In percent), Wyoming (-0.89 percent), West Virginia (-1.49 percent), and North Dakota (-1.57 percent). The best job growth is seen in Utah (3.73 percent), South Carolina (3.25 percent), Washington (3.06 percent), Idaho (3.05 percent), and Florida (2.99 percent). These states also have correspondingly robust real estate markets. M // Where do you see the hous- ing markets heading from here? JONES // My model forecasts a 5.7 percent increase in housing sales in 2016 based on current data. Fannie Mae and the Mortgage Bankers Association (MBA) are less opti- mistic and are forecasting increases of existing home sales of 2.9 per- cent and 5.4 percent, respectively. At the same time, however, they see purchase lending on homes ris- ing from 4.2 percent (Fannie Mae) to 10.2 percent (MBA). A year from today, expect the 30-year fixed residential loan to be in the 5.2 to 5.6 percent range. Lenders will bear the brunt of ris- ing rates on the refinance side in the form of a significant decline in refinancing volume. The average estimate of refinance lending vol- ume in the second quarter of 2015 by Fannie Mae, Freddie Mac, and the MBA was $201.8 billion. By the fourth quarter of 2016 that is estimated to decline by almost 60 percent to $82.25 billion. Throw in the pending impact of the CFPB and the related compliance and conversion costs, and the result is ongoing consolidation in the lend- ing industry. Expect home price increases to mute, however, increasing from 3.2 to 3.8 percent in 2016 versus the cur- rent 6.16 percent pace. Supply and demand are driving the increase. In the latest 12 months the U.S. added 2.75 million net new jobs and issued 1,053,726 residential building permits. This equates to 2.59 net new jobs per new dwelling unit. Normally each new dwelling unit needs 1.25 to 1.50 net new jobs, so the current level of construction is approximate- ly one-half of the number needed to satisfy demand. Both rents and prices will rise in 2016. Focus on job growth to see where the housing market is heading. Jobs are everything. M // What is a key indicator of economic health? JONES // Jobs are everything to an economy and the demand for real estate. Good news is that the U.S. now has more jobs than any time in history. For the past 10 months, more than 2.75 million new jobs have been added in the trailing 12 months. The last time the U.S. added 2.9 million or more jobs was June 2000. So yes, the 2.937 million 12 month total in July 2015 was the best job growth period in 15 years. M // Does the growth of certain jobs bode better than others? JONES // Yes, as important is the type of jobs being created in terms of income. USA Today reported that the majority of jobs created in the five-year period from 2010 to 2014 were in the highest-paying range of $53,000 and up (repre- senting 44 percent of total job growth), while the lowest income level of less than $32,000 had the smallest number at just 27 percent. M // What can we expect in terms of the Gross Domestic Product (GDP) in 2016? JONES // The GDP for the sec- ond quarter of 2015 was restated upwards to 3.7 percent after de- clining three consecutive quarters. Expect more of the same in 2016 as there are no speed bumps cur- rently on the horizon. Even the Federal Reserve Bank considering raising rates is a signal of strength in the economy. M // The big question on every- one's mind is of course, what can we expect in terms of full-hous- ing market recovery. What is your opinion? JONES // If you are waiting for the housing market to recover, it already has. The U.S. hous- ing market is back to normal and growing once again. Year- to-date, housing sales are up 7.9 percent when compared to a year ago. The median home price of $236,300 notched in June 2015 was the highest price ever recorded. Home values are doing the same, with median prices up 6.16 per- cent year-over-year on a 12-month moving average. Once again, however, I invoke the TINSTAANREM clause— There Is No Such Thing As A National Real Estate Market. Each real estate market is different. Ditto the economy. While some markets are hot others are not. Job growth (the ultimate driver for housing demand) is negative in just four states based on year-over- year comparisons: Alaska (-0.06 As the year comes to a close, economic predictions for 2016 are flooding in. however, not all opinions have equal heft. When it comes to an viewpoint you can trust, look no further than Ted C. Jones, chief economist and SVp of Stewart Title Guaranty Company. In this role, Jones addresses the information needs of internal and external customers, conducts on-going research, and supports economic and financial analysis for the company and its customers. he earned a phD in finance with a minor in statistics and a master's degree in land economics and real estate from Texas A&M University. he holds a Bachelor of Science degree from Colorado State University. "If you are waiting for the housing market to recover, it already has."

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