Five years into recovery--
Europe deals with deflation fears… EU voters elect right wing anti-EU candidates: The talk is Europe finally has started to rev up, but then you read these headlines. Unemployment remains high—it's even increasing in stalwart Germany and GDP is hardly better than anemic continent-wide.
U.S. housing price increases slow down… Housing starts lag: The talk is housing is improving. Prices are way up in some formerly crash-and-burn markets like Phoenix (still 30% off peak) and Las Vegas (44% off peak), but that closer look shows they remain way off market highs. Prices have recovered to past peaks or above in some less boom-bust markets like Denver and Dallas, but much of the buying action is for all cash with limited available inventories. Higher mortgage rates, the prospect of increasing interest rates, and stricter credit standards all stand as hurdles in the way of many buyers, who just cannot afford to be owners. If the numbers of sellers increase, price escalation probably will slow. So yes, the housing market is better, but recovery is spotty and more Americans must view their home as a nest, not an investment nest egg.
U.S. unemployment rate falls, but wages stay at or near 2002 levels: The talk is realistically mixed and not particularly optimistic. Even though the unemployment rate has dropped, fewer people are in the jobs market and average worker compensation has remained stuck in place for more than a decade. The average Joe or Jan, meanwhile, pays more for health coverage and many college grads entering the workforce are saddled with student debt, eating into their spending power.
China lowers growth forecast: The talk is all about how the government can control the economy so don't worry about all the bad debt, empty buildings, lowered demand for goods, and rampant air and water pollution. Hey, the growth rate is still pegged at around 7% for this big engine of the intricately-connected global economy. And you believe that? The government indeed controls what it forecasts.
U.S. retail sales are below estimates: The talk is the cause is weather related—the cold winter and all those snow days keeping people out of stores. But let's face it, the average American continues to struggle and has less to spend, especially since easy credit is harder to obtain. Charging what you cannot afford is harder to do.
Inflation is under control: The talk is the Fed can keep interest rates low, because inflation is under control. But have you been in a supermarket lately? Dairy, fish, meat and produce prices seem to have jumped recently. All the packaged goods shrink in size, but the prices don't. Health care costs may be slackening, but we all pay more out of pocket. And gasoline prices have spiked again.
Now consider that from the end of World War II until 2007, the average U.S. recession lasted 10 months, while the average expansion lasted 57 months (four years and nine months), for an average business cycle of 67 months or about 5 years and seven months. So based on the averages we may be approaching the end of cyclical expansion.
If we are nearing the peak, it's not been much of a climb.
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Jonathan D. Miller
A marketing communication strategist who turned to real estate analysis, Jonathan D. Miller is a foremost interpreter of 21st citistate futures – cities and suburbs alike – seen through the lens of lifestyles and market realities. For more than 20 years (1992-2013), Miller authored Emerging Trends in Real Estate, the leading commercial real estate industry outlook report, published annually by PricewaterhouseCoopers and the Urban Land Institute (ULI). He has lectures frequently on trends in real estate, including the future of America's major 24-hour urban centers and sprawling suburbs. He also has been author of ULI’s annual forecasts on infrastructure and its What’s Next? series of forecasts. On a weekly basis, he writes the Trendczar blog for GlobeStreet.com, the real estate news website. Outside his published forecasting work, Miller is a prominent communications/institutional investor-marketing strategist and partner in Miller Ryan LLC, helping corporate clients develop and execute branding and communications programs. He led the re-branding of GMAC Commercial Mortgage to Capmark Financial Group Inc. and he was part of the management team that helped build Equitable Real Estate Investment Management, Inc. (subsequently Lend Lease Real Estate Investments, Inc.) into the leading real estate advisor to pension funds and other real institutional investors. He joined the Equitable Life Assurance Society of the U.S. in 1981, moving to Equitable Real Estate in 1984 as head of Corporate/Marketing Communications. In the 1980's he managed relations for several of the country's most prominent real estate developments including New York's Trump Tower and the Equitable Center. Earlier in his career, Miller was a reporter for Gannett Newspapers. He is a member of the Citistates Group and a board member of NYC Outward Bound Schools and the Center for Employment Opportunities.
