Economist Dr. Stephen Fuller Talks About Local Housing Market, Economy

Dr. Stephen Fuller, one of the region's most followed economists and Director of the George Mason Center for Regional Analysis, spoke the other day on where we've been and where we can expect to be heading in the near future. Here's a summary of his presentation and PowerPoint (thank you to Kim Spear for sharing this with me/you): 

• The first quarter 2009 will be the worst quarter since the 1982 recession, which lasted 16 months.  He predicted that the recession we're in now will last between 17 to 19 months. Where are in that cycle? The 14th month.
• So what's the good news? "By the time you're back from your summer vacations our regional economy will start to perform better," said Fuller. (I'm ready to start my vacation now.)
• The DC region will enter a recovery cycle in about 5 to 6 months. As before, our region will bounce back before most of the nation.
• Need to buy a house? The residential market is about through its downward cycle here. Residential permits for housing in the District were higher in December 2008 then they were in December 2007.
• Need to finance a house? He predicted that mortgage rates would drop to around 4% within the next two months; and, most likely increase to between 6% – 7% by 2011 due to inflationary pressures.
• So what about the job market? Unemployment usually lags behind the economy by about two years. The unemployment rate will most likely rise to 9.5%, peaking in the first quarter 2010. Nationally, job losses could continue through 2011. Predictions for job growth for the DC metro region in 2009 are between 20,000 – 23,700 new jobs (these are full-time workers – not self employed, contract workers, or part-timers). Our average job growth is around 45,000 jobs per year in this region.
• The Federal government will increase its presence in our market growing to  33.3% of the employment sector. Associations will shrink some, and health, education, and the professional service sectors will continue job growth.

Now I know that Dr. Fuller is a highly-educated and highly-followed economist in the area and I'm just a "real-a-tor", but I will have to respectfully disagree on a couple points:

1. "The first quarter 2009 will be the worst quarter since the 1982 recession" - Not when it comes to real estate in the area. January and February have seen quite an up-tick in buyer demand while inventory levels having been steadily dropping since the middle of 2008 and are at the lowest level in years. Buyer demand is up and properties are moving faster than they have in recent years. Multiple offers on good deals are extremely common nowadays. (Even if he's right on this one, at least the worst will soon be behind us)
2. "…mortgage rates would drop to around 4 percent within the next two months…" – I'm not quite sure about that. The Fed did everything they could to lower the rates to 4.5 percent and that still didn't happen. With the economy getting worse and lenders outwardly saying that they aren't loosening lending guidelines anytime soon, where rates are today is about as low as I see them going. And even if they do go lower, I don't see it happening within the next two months. I'll definitely come back to this discussion in a few months to see who was right (though I would love to be wrong on this one for the sake of borrowers/home buyers).