COMMENTARY | It’s taken a while for America’s economic engine to gain some speed, but it finally appears that the nation is back on track after having derailed when the housing market crashed.
Mortgage giant Fannie Mae, which keeps tabs of such things, has released its full-year forecast for both the economy and the housing market.
The improving job market is helping to drive demand for new mortgages despite interest rates, which have steadily risen since May from near record lows.
The jobless rate will probably decline for the rest of this year to a five-year low of 7 percent in the first quarter of 2014, according to Fannie Mae.
It’s that kind of news that helps to fuel what I have described in the past as the real estate industrial complex. As the job market improves and people can afford to buy homes, they also need to hire people to either build those homes or fix up existing ones.
Demand for homes is on the rise, which means those lots that have sat vacant for years will see new homes begin to spout. Contracts for future construction in South Florida shot up 38 percent in July, according to a report from McGraw Hill Construction.
Electricians, plumbers, roofers, interior designers, those who sell fences and hurricane shutters — the list goes on and on — will all benefit.
Just in the last few days alone both Lowe’s and Home Depot reported significantly improved earnings. Lowe’s second quarter net income rose 26 percent, beating Wall Street expectations. Home Depot also credited the housing recovery for its 17 percent earnings increase.
Banks are starting to get their construction departments up and going after years of inactivity.
Those to benefit at first will be the big builders that managed to survive the downturn. The smaller builders have since gone by the wayside. However, like any life cycle, there will be new players who come into the market and we will see a rebirth of the industry.
With all of that said, Fannie Mae Chief Economist Doug Duncan leaves us with this one caveat: “The biggest risk to this forecast is the expected reduction in the Federal Reserve’s asset purchases, which would likely put additional upward pressure on interest rates and lead to some volatility in capital markets. Although the nature and timing of the tapering are still to be determined, we continue to expect the Fed will scale back its asset purchases and end the program by spring. In addition, we may see some fiscal tightening this fall as the debate over federal spending and the debt ceiling takes place.”
As Bette Davis said in All About Eve, “Fasten your seat belts. It’s going to be a bumpy night.”
The good news is at least the train is expected to keep running on track and hopefully on time.
Roy Oppenheim is Florida’s leading real estate and foreclosure defense attorney. He left Wall Street for Main Street and, in 1989, founded Oppenheim Law , Weston Title , and the South Florida Law Blog with his partner and wife, Ellen. His entrepreneurial spirit and passion for helping to defend homeowners led Roy to start “In the Trenches” where he speaks out for the people and their constitutional rights.