Economy Drives Home Sales and Vice Versa
Near the beginning of a presentation Tuesday to Northwest Indiana Realtors, the chief economist for the National Association of Realtors cited a rule his audience likely already knew: "As the economy goes, so goes the housing market."
Lawrence Yun told about 150 members of the Greater Northwest Indiana Association of Realtors that the reverse can also be claimed. A healthy housing market can help boost a sluggish economy, and the current market offers "areas of potential growth," he said.
Yun began with an overview of the national economy, which, he said, has shown a stubborn trend toward below-average growth since the Great Recession.
Individual wealth is up in the aggregate, but "we are just spinning wheels for the middle class family. There is a great deal of discontent about the direction of the country."
That has been coupled with historically low participation by able-bodied adults in the job market, Yun noted.
Remedies to get growth back to its historical average might include a lower corporate tax rate, Yun said, which would allow big corporations to repatriate profits to the United States. "Companies are sitting on piles of cash," he said.
Yun also suggested greater infrastructure investment might stir up corporate investment as he spoke at the event at the Avalon Manor in Hobart, Ind.
Home sales, meanwhile, have shown a moderate recovery, Yun said. "The industry is actually slightly outperforming the country."
Prices are up, so owners' equity is rising, but that's balanced by the difficulty it creates in converting renters to owners, especially among the millennial generation, Yun said.
Much of the difficulty is the result of tight inventory, something seen in recent years in Northwest Indiana as well as much of the rest of the country. There have been "multiple years of underproduction," he said.
By the spring of next year, Yun recommended, Realtors should advise their clients seeking to buy a home to move quickly or lose the home to someone else.
Yun said relatively low mortgage rates will likely rise — though not necessarily because of any interest rate action by the Federal Reserve, but because of a likely uptick in inflation.
In general, pent-up post-recession demand will likely lead to a growing market in the next five years, Yun said.
As he concluded, he refocused his initial rule to suggest that "the local (housing) market will follow the local job market."
The remaining speakers at Tuesday's GNIAR NWI Economic Development Forum hope the projects they're working on will provide that job-market growth.
Mark Lopez, chief of staff for U.S. Rep. Pete Visclosky; Sherri Ziller, chief operating officer at the Northwest Indiana Regional Development Authority; and Michael Noland, president of the South Shore Line, promoted the commuter railroad's plans for a southward extension in west Lake County and the double-tracking project along the current line.
Proponents of the rail projects say they'll help reverse population trends that have seen Lake County lose residents. More fully opening the Chicago job market to Northwest Indiana will encourage residents to stay, and new ones to move in, they say.