Atlanta Fed Chief: Southeast Real Estate to Stay Strong
By Scott Kauffman
On the heels of a historic election, U.S. President-elect Donald Trump left many Americans – and the rest of the world – with a lot of questions and uncertainty about the direction of the country’s future. If the National Association of Realtors and National Association of Home Builders are any barometer of America’s pulse, however, the 2017 economic outlook looks upbeat.
Indeed, with a new president known for building a multi-billion real estate empire over his lifetime, it’s only fitting that America’s real estate market is riding a wave of modest optimism. At least that was the overall mood of some 20,000-plus Realtors and industry professionals who attended the NAR’s annual Conference & Expo Nov. 4-7 in Orlando.
The NAR conference got off to a positive note when NAR’s chief economist Lawrence Yun and president/CEO Dennis Lockhart of the Federal Reserve Bank of Atlanta took the main stage and laid out their forecast for the coming year. Fueled by more millennials entering their prime home-buying years, rising household formation, and continued job gains boosting overall demand, Yun forecasted existing-home sales to grow roughly two percent to an estimated 5.46 million in 2017, up from an expected 5.36 million existing-home sales in 2016.
If the 2016 numbers fall into place as expected, it will be America’s best year for existing-home sales since 6.47 million transactions in 2006. In another upbeat note, Yun said the country’s “net positive” economic conditions should continue to deliver a more prominent four percent jump in 2018 existing-home sales to 5.68 million.
Yun anticipates housing starts to jump 5.3 percent in 2017 to 1.22 million units. However, this is still under the 1.5 million new homes needed to make up for the shortfall in recent years and keep up with the growing demand. New single-family home sales are likely to total 570,000 this year and rise to around 620,000 in 2017.
One place the Atlanta Fed President expects to see continued real estate activity is his growing Sun Belt region.
“The biggest factor of course is in-migration,” Lockhart told this reporter. “Part of that, as you know very well in Florida, is driven by demographics … Retiring, older Baby Boomer citizens at the present. I would think that’s a sustainable trend in the state of Florida. There was a period where there was net out-migration during the recession years and that was a very troubling situation for the state of Florida. That has reversed.
“In-migration is now returning at a healthy clip in Florida, and the Southeast in general or Sun Belt, has seen an in-migration. My residence is of course in city of Atlanta and Atlanta continues to grow in population terms. Now, there’s also migration simply because there’s economic opportunity of course. The Southeast now, including Florida, has a pretty well-diversified economy and it resembles well the national economy pretty closely. That is a better environment for either people to stay or people to migrate in than economies that are dominated by particular industry.”
Lockhart said one exception in the booming Southeast is Louisiana because of its disproportionate high oil and gas ties as it relates to state domestic gross product.
“That industry has seen some tough times,” Lockhart added. “Therefore you’ve had people under stress because of loss of jobs; loss of value of real estate and loss of income and so forth. But the diversification of the Southeast makes for a good environment for continuing in-migration.”
To further support the fundamental strength of the residential real estate market going forward was a report by the National Association of Home Builders showing markets in 162 of the approximately 340 metro areas nationwide returned to or exceeded their last normal levels of economic and housing activity in the third quarter of 2016.
This NAHB/First American Leading Markets Index (LMI) released Nov. 7 represents a year-over-year net gain of 73 markets or 45 percent. Overall, 91 percent of markets improved from the previous year. The index's nationwide score ticked up to .98, meaning that based on current permit, price and employment data, the nationwide average is running at 98 percent of normal economic and housing activity.
"Ongoing job growth, low mortgage rates and rising incomes are contributing to a firming housing market and economy," NAHB Chairman Ed Brady said. "Though some areas are recovering faster than others, the overall trend is positive."