Experts continue to show optimism in their predictions for the future of both housing and commercial real estate, according to a nationwide survey released last week.
The study, conducted in March and analyzing 2009 through 2015, showed significant improvement in the predictions of 38 industry economists and analysts for commercial real estate activity when compared to the last survey conducted September 2012. The studies were done by the Urban Land Institute, a nonprofit education and research institute with 30,000 members from all aspects of land use and development, and Ernst & Young, a global company in assurance, tax, transaction and advisory services.
“You have a burgeoning housing recovery, and you have a tremendous amount of new (housing) supply coming online,” Kevin J. Thorpe, chief economist and principal at Cassidy Turley in Washington, D.C., said during a telephone conference last week. He noted the importance of home sales for economic growth nationwide. “Housing is big. It’s critically important for this recovery.”
According to the study, nationwide real estate transaction volume is expected to reach $310 billion this year, up from $290 billion in 2012. That trend is expected to continue with increases up to $360 billion in 2015.
The survey reinforces optimism regarding the single-family housing industry. Single-family housing starts, which reached near-record lows between 2009 and 2011, now are projected to reach 700,000 in 2013, up from 535,300 in 2012, and nearly double to more than a million in 2015.
Locally, new home starts are following the trend.
Mike Sliwinski, director of the Trumbull County Building Department, last week said new home starts in Trumbull County are beginning to take off, already surpassing numbers from the previous year. The county issued 15 permits for single family new housing starts so far this year. That is up 36 percent over the 11 issued last year at this time.
Likewise, Mahoning County Building Department reported through the end of March, the county had issued 21 permits for new single-family homes. At the same time last year, Mahoning County building officials had issued just nine permits.
Nationwide, analysts are predicting 6 percent increases in new home prices this year. While experts predict those numbers to slip to 5.3 in 2014 and 5 percent in 2015, they said the projections are still well above previous predictions, reflecting signs of a solid housing recovery.
Locally, the sale of existing homes also has been trending upward. While Trumbull County home sales that closed in February, the most recent figures available, were slightly lower than the previous February – 105 this year compared to 114 in 2012 – some experts had attributed the dip to low inventory.
Information from the Warren Area Board of Realtors shows that February’s inventory, 1,033, is the lowest historical inventory since at least 2004. By comparison, that figure is down nearly 20 percent from the available inventory of 1,285 the previous year.
Mahoning County, however, reported significant improvement in February home sales of 150, versus 107 in February 2012, according to Youngstown-Columbiana Association of Realtors statistics.
Likewise, Mahoning County was reporting its lowest inventory of home sales, 1,322, since 2004. By comparison, that county reported 1,555 homes on the market in February 2012.
For commercial properties nationwide, expectations were mixed.
The report anticipated some cooling in the apartment sector, but improving vacancy rates in industrial/warehouse leasing, office space and retail space.
A summary of those nationwide predictions are:
Apartment rental vacancy rates are projected to go from 5 percent in 2012 to 5.2 percent in 2015.
Industrial/warehouse vacancy rates are expected to continue declining from 12.2 percent this year to 11.4 percent in 2015.
Office vacancy rates are expected to drop from 14.8 percent in 2013 to 13.6 percent in 2015.
Retail availability rates are expected to decline to 12.5 percent this year, then drop steadily to 11.9 percent by 2015.
The projections for real estate are based on a generally favorable outlook for the economy; steady improvement is anticipated for both economic growth and employment.
“There are so many bright spots now in this recovery, you really don’t have to look much further than to look at housing and equity markets. This market really wants to go faster,” said Thorpe. “Consistent job creation of 2 million jobs per year, that is not far off of what we were doing before the recession.”
Still tax issues and increasing inflation will leave some uncertainty in the economic outlooks, said Craig Thomas, vice president of market research for AvalonBay Communities, Inc. in Arlington, Va., who also participated in last week’s phone conference.
“Inflation is coming,” Thomas warned. And with that comes higher interest rates.
“You might want to lock in lower rates before it starts to go up,” he said.