Daily Real Estate News | November 15, 2007
Slim Chance of Recession, But Job Growth May Slow
“Although the economy is facing some challenges, there’s only about a 10 percent chance of recession, which is good news for commercial real estate,” NAR Chief Economist Lawrence Yun told attendees at the Commercial Business Trends Forum at the NAR Conference & Expo.
Although the economy added 4 million new jobs in the last year, job growth may slow in 2008, Yun acknowledges. However, he sees positives in corporate profit growth and strong exports supported by a weak dollar. “Companies are flush with cash so they can hire more workers and invest in new plants and technology,” Yun says. And, despite the weak dollar, Yun says there’s no indication that inflation and interest rates will rise.
John Tuccillo, former NAR Chief Economist and head of JTC LLC, during a panel discussion that followed Yun’s presentation, says he sees consumer consumption levels deteriorating over the next six months because of the drop in home appreciation and flat wages. “People had been using their homes as ATMs, and they can’t do that anymore,” Tuccillo says.
Yun says slower appreciation and rental growth for commercial properties in the last two quarters is putting many commercial investors on the sidelines, especially when combined with the spread of the credit crunch to the commercial sector. Foreign investors have been filling in the gap, purchasing an estimated $50 billion in U.S. commercial property in 2007.
— REALTOR® Magazine Online