The Economic Outlook
The Economic Outlook for Real Estate Investors and Decision Makers
Dr. Mark G. DotzourChief Economist
Real Estate Center at Texas A&MCollege Station, [email protected]
Topics for Today
• The outlook for job growth and the economy• The investment environment
Source: The Conference Board
Consumer Confidence Index
Aug-00
Feb-01
Aug-01
Feb-02
Aug-02
Feb-03
Aug-03
Feb-04
Aug-04
Feb-05
Aug-05
Feb-06
Aug-06
Feb-07
Aug-07
Feb-08
Aug-08
Feb-09
Aug-09
Feb-10
Aug-10
Feb-11
Aug-11
30405060708090
100110120130140150
Consumers Paying Down Debtfor First Time in 50 Years
Personal Saving Rate
Internet Sales Exploding
Corporate Profits (With Inventory Valuation Adjustment & Capital Consumption Adjustment)
Jan-90
Jan-92
Jan-94
Jan-96
Jan-98
Jan-00
Jan-02
Jan-04
Jan-06
Jan-08
Jan-10
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
Billi
ons
Source: Department of Commerce
National Federation of Independent Business
Small Business Outlook“Planning To Hire People In The Next Six Months”
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
-10
-5
0
5
10
15
20
25
Net
% o
f R
espo
nden
ts
Industries Under Regulatory Distress
Health CareHealth InsuranceAutosElectric UtilitiesCoal CompaniesBanks and Mortgage LendersAircraft MakersHomebuildersAppraisersOffshore DrillersNatural Gas ExplorationResidential and Commercial Realtors
Corporate Hiring Plans: Next 6 Months
Source: Business Roundtable
Q3-11 Q2-11 Q1-11 Q4-10
More Jobs 36% 51% 52% 45%
Less Jobs 24% 11% 11% 18%
Business Hiring
Government Sector:Unfathomable Budget Deficits
Trade Weighted Exchange Index: Major Currencies
Money Supply and Velocity:Huge Monetary Base Could Fuel Inflation
Money Supply and Velocity:Velocity at Historic Low Levels
Money Supply and Velocity:Actual Money Supply Barely Increasing
Inflation Rate:CPI Remains Low Despite Food/Fuel
Ten-year Treasury Rate
Margin DebtDebit Balances at Broker/Dealers
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
100000
150000
200000
250000
300000
350000
400000
Mill
ions
Source: Standard and Poor’s
Mar 2000 Dow 11,234Mar 2001 Dow 9,106Mar 2002 Dow 7,415
Jul 2007 Dow 14,021Jul 2008 Dow 10,827Jul 2009 Dow 8,087
International Capital Flows1983 to 1986 U.S. Commercial RE1987 to 1989 Japanese Stocks1992 to 1997 Asian Tigers1997 to 2000 U.S. Stocks2004 to 2007 U.S. Commercial RE2007 to 2010 BRIC Countries and Commodities2010 to 2011 U.S. Treasuries, Gold, Swiss Franc U.S. Trophy CRENext stop U.S. stocks ?Next stop U.S. real estate?
Key Issues for 2012• When will the housing market clear?• When will the commercial real estate market clear?• Who is right? The gold buyer at $1800 per ounce or the 10-
year treasury bond buyer at 1.75%. • It appears that major business and investment decisions will
be postponed until after the 2012 election.• If the stock market swoons, look for more QE.• Interest rates stay low though all of 2012.• Could be some enthusiasm in the spring and summer of
2012 if polling data is encouraging for business owners.• Major inflection point in the first quarter of 2013.