Real Estate Report January 16, 2013

Not Just Housing

If you have been reading our economic commentary for the past two months, you might get the impression that the latest segment of the economic recovery is all about housing. While it is true that housing has finally stirred and this sector is now contributing positively to the recovery, we don't want to give you the impression that it is "all about housing." Statistics released by the auto industry in the past few weeks show that car sales rose approximately 13% last year, even stronger than the rise in home sales. Right now car sales annually are approaching 90% of the records set before the recession hit, with more growth expected in 2013. We always expected that the recovery in car sales would precede the housing recovery because cars don't last as long as homes and must be replaced. Home sales are nowhere near 90% of pre-recession levels.
However, what is important here is that the auto industry is reacting to the same fundamentals as the housing industry. Lower jobless rates, increased household formulation and stronger consumer confidence. It is important to understand that a real economic recovery must span over the entire economy, not just one sector or another. For example, the health sector has been stronger than other sectors during the past few years. Adding housing and autos to the recovery makes it broader based and can help move us to a virtuous cycle. More people buy cars and that increases manufacturing jobs. Lower unemployment enables others to purchase cars and houses. Again, regardless of the political troubles Washington seems to be having, the consumer is waking up which is a good sign for 2013.

Will homes soon be powered and operated all from a smartphone? "There are smarter phones, so why not smarter homes?" Alexander Ljung, SoundCloud CEO, told USA Today. "It's perhaps natural that the phone is a remote control for a lot of things. Touch-screens are replacing buttons." A range of home devices could soon all be controlled by a phone or tablet, from kitchen appliances to washers and dryers, lights, pools, and windows, says tech experts. Major tech companies like Apple, Microsoft, Google, and Samsung are eyeing home technology as a booming business and are introducing a range of products for wired and automated homes. For example in May, Microsoft debuted an operating system for homes, called HomeOS, that connects smartphones, game consoles, wireless routers, home automation devices, tablets, and security cameras, all for easier access, sharing files, and syncing. The attention to wired homes also is causing architects to take a closer look at how they design and build homes so that they can better incorporate the new gadgets, blending them into kitchens, living rooms, and bedrooms, USA Today reports. For example, entertainment centers need sound systems and screens within walls, and architect Tom Kinslow notes that smart windows are larger than traditional windows. A range of products are being developed to outfit these high-tech homes. For example, flexible displays built into kitchen appliances will be able to tell home owners the proper temperature to cook an item at or even whether something has spoiled in the refrigerator. Bossa Nova Robotics is even developing a robot maid that will be able to complete house chores while home owners are away at work. Source: USA Today

Veros Real Estate Solutions has announced that analysis of its data shows compelling evidence that the national real estate market has hit bottom and is now in a full recovery. This is the conclusion of the company’s VeroFORECAST real estate market forecast for the 12-month period ending Dec. 1, 2013, updated quarterly and covering 975 counties, 335 metro areas, and 13,586 zip codes. The forecast update shows significant improvement on a national basis, indicating that on average the top 100 metro areas can expect 1.2 percent appreciation over the next 12 months. This is the second quarter in a row where this index has shown forecast appreciation. Highly notable is the re-emergence of several very strong market forecasts, with Phoenix appearing again as the top market with over 10 percent annual appreciation predicted. This is the first time since 2006 that Veros has forecast double-digit annual appreciation in any market. In addition, the depreciating markets are becoming less severe, with the worst markets in the -2 to -3 percent range, which is a typical level of depreciation of the poorest performing markets even during healthy market periods. For the first time since the recession began, on a national level, two-thirds of all markets are expected to either be flat or appreciating during the coming 12 months. Source: Veros
A big growth in new household formation is expected to drive up housing starts in the new year that will outpace the apartment boom, according to forecasts by Freddie Mac’s Chief Economist Frank Nothaft. Nothaft is forecasting a net growth of 1.2 to 1.25 million new households in 2013 that will provide a big boost to housing starts next year. That expected growth also will likely drive down apartment vacancy rates to 10-year lows and outpace the boom in new apartment construction, Nothaft says. Unemployment is expected to improve slightly in 2013 and the job and income gains will help jump-start more household formation, according to Nothaft. Also, more adult children who took up residence in their parents' homes are expected to move out next year, helping to increase household formation. “The last few months have brought a spate of favorable news on the U.S. housing market with construction up, more home sales, and home-value growth turning positive,” Nothaft says. “This has been a big change from a year ago, when some analysts worried that the looming ‘shadow inventory’ would keep the housing sector mired in economic depression. Instead, the housing market is healing, is contributing positively to GDP and is returning to its traditional role of supporting the economic recovery.” Source: RISMedia

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Laura Glass

www.landmarkbank.com/lauraglass