WRAR Commercial Day 2015

The Wilmington Regional Association of Realtors welcomed NAR Chief Economist Dr. Lawurence Yun to the Terraces yesterday morning. Yun spoke about the current real estate climate in the Cape Fear region, as well as the local and national factors impacting the construction and sale of residential homes and commercial facilities.

Yun opened the lecture by explaining that real estate follows the economy; when people are spending, businesses open, and buildings are built and rented to accommodate a thriving retail industry.

He went on to divulge that big commercial deals are outpacing small commercial deals, alluding to the fact that franchises and corporations are faring better than independent business owners as we continue to recover from the recession.

Yun illuminated for the group that while people have come to believe a GDP of 3% is positive in the last few years, our gross domestic product has in fact been under performing (below 3%) for the last decade. The GDP refers to the nations collective average income. To date, the national unemployment rate in 2015 is 5.1% (normal), but it must be noted that the employment rate is not rising (not normal). Yun credits the imbalance of graduates entering the job market and working professionals not leaving the workforce at the same rate they once were (when the economy was stable and people had savings for retirement!). Yun likened this aspect of the economy to us "treading water."

Wilmington experienced a mild recession, with a loss of approximately 15,000 jobs. In the last eight years, the area has seen a 23% increase in job creation compared to 8% nationally. New Hanover and Pender counties have had more significant gains than neighboring Brunswick and Columbus counties.

Positive projections for the real estate industry, particular commercial transaction are due in part to recent reasonable mortgage rates. A common misconception among the public is that mortgage rates are directly determined by the state of the Federal Reserve - not so. The Bond Market dictates lending rates and several factors including inflation/erosion of purchasing power, foreign capital, US budget deficit influence the Bond Market. Essentially, Yun says, when you examine the regulation of money in a given nation's economy and compare it to America's, the US financial system is the "cleanest shirt in the dirty laundry basket."

A particular concern on the horizon for realtors is inability to convert renters to homeowners. Rent is at a seven year high, while rental vacancy is at a 30 year low. By 2017, the cost of living will rise 3% due to inflation. Yun explains that "When rents rise, usually it pushes people to homeownership... Raised rent is eating into their savings, so there is not money for a downpayment - as wages are not increasing" proportionally. He warned the crowd to be "cautious" and "keep an eye on new construction," as an oversupply of multi-family dwellings would stabilize homeownership when we want that population to continue to rise.