So, it was quite the turnout at the Peppermill for this morning’s Forecast 2006. Sponsored by the Northern Nevada Builder’s Association, real estate agents, mortgage brokers, contractors, developers and everyone with something to pitch the crowd huddled close to hear the panel of experts predict our future. Here’s the nutshell recap…
The economist is concerned. A lack of job growth, wages not keeping up with inflation, lack of savings from income, consumer debt and surging energy prices have us at a crossroads. Due to a variety of factors, she predicts a recession in late 2006, early 2007. more
The land guy sees a surge of supply in 2006. Lots are getting smaller as land and water get more expensive. Attached projects are coming back into favor. National new home builders now outnumber local companies. 8714 units are in progress (a two year supply), 18,193 are in the pipeline and 30,057 are planned for the future, though no water has yet been identified, so this phase may never happen. Still, that’s a lot of houses.
The commercial guy sees a ton of growth in the industrial sector, a lot of growth in the retail sector, and level line in the office sector. Apparently our Class A office buildings lease for about as much as those in Silicon Valley, so we’re not as competitive any more. (Except that we have no state tax and our laws are far more friendly to business. But, I digress…)
The residential guy has access to the same data I do, so, no real surprises here. Prices are up, interest rates are up, inventory is up. He’s expecting a balanced market with 7% price appreciation this year. Big unknowns are the president’s tax reform bill, the new Fed chairman’s stance on interest rates, regional job creation, and net migration into the area.
One thing that struck me from all the presenters? This year, because we have inflated inventory, everything depends on interest rates and net migration. If interest rates stay low and people keep moving here, we’ll probably have a decent year. Net migration I’m not so worried about because we have a strong job market. But if interest rates go up, that would seriously thin the buyer pool (creating downward pricing pressure, always an interesting opportunity for cash investors.)
