Happy Friday! Each year, Vectra Bank hosts their local economic forecast conference. They invite local and national experts to present on the economy and we always learn so much. This year was no different! Even though we couldn’t attend the conference in person, we got to watch the presentation via video this year. Thanks, as always, to local Vectra branch manager Drew Britton for the invitation!
As usual, we got to listen and learn from Patricia Silverstein, President and Chief Economist at Development Research Partners, a Colorado-based real estate analysis and economic development research company. The second presenter this year was Dr. Marci Rossell, Economic Forecaster, Former Chief Economist at CNBC and Co-host of Squawk Box.
If you’d like to watch the entire presentation, you can do by clicking this link and inputting the password: Forecast
I’ve also outlined what we learned below.
Economic Forecast: So how is our local economy doing? And what might we expect from the local economy in 2021?
Patricia Silverstein gave us some valuable, specific details about the Denver metro and Colorado as a whole. Here is what we learned from her:
- Most unemployment (53%) happened within lower wage sectors like leisure, hospitality, retail, and education.
- In the Great Recession in Colorado, we lost 155,000 jobs over 20 months. It took 38 months to reach full recovery. During the COVID recession, we lost 343,000 jobs in 3 months. 56% of jobs were recovered from May to December 2020.
- Employment loss varies across the state. Grand Junction and Colorado Springs have fared best with regard to job loss. Boulder, Fort Collins, and Greeley have fared worse due to oil and gas job losses in Greeley. Fort Collins and Boulder job loss has been worse due to lack of university students.
- High wage positions represent just a .7% decline in employment. We lost 74,000 jobs in 2020 in Metro Denver. We lost 131,000 jobs in Colorado as a whole. We are projected to gain back 48,000 in Denver in 2021 and another 68,000 in Colorado.
- Vacancy rates in commercial real estate (office, industrial and retail space) have increased.
- Millennials are now the largest population group in Colorado. This is important for residential real estate and building as millennials are ready to buy homes now.
- Moving into the COVID recession, Colorado had the 7th largest concentration of leisure and hospitality workers and of course, this group and sector has been very largely impacted by COVID.
- Residential real estate also shows a story of contrast throughout the state. Median home price increases are positive across the state, although growth in median sales price has varied by area.
- Rental rates are up on average 3% year over year, and this is down from the 10% increase seen in years past.
- Building permits increased 21% in 2020 and the expectation is that 2021 will be the same.
The overall message and economic forecast for Coloradoans from Patricia Silverstein was that we can expect to see a growth trend this year in our economy, and things will feel much more normal by mid-year.
Economic Forecast: How is our national economy doing? And what might we expect from the national economy in 2021?
Next up was Dr. Marci Rossell. Her presentation on the national economy starts at the 29 minute mark of the video. Here are the bullet points from her presentation:
- The global economy is exiting from the COVID cave. The economy should be bouncing back in the second half of this year.
- Usually recessions begin in one sector of the economy and slowly make their way into the other areas of the economy. This time it was more like a shock from outside the economy, more like a natural disaster.
- Hospitality and the leisure industries were hit hardest across the globe.
- The savings rate for those who have remained employed has actually increased. Before COVID, the savings rate was 8%, month-by-month. Americans were saving 8% of their income. Now, the savings rate for people who kept their jobs, has elevated to 14%. This represents a $1.6 trillion in excess savings and this excess savings could fuel the economic recovery.
- The unemployment rate is now at ~7%. Women have been more impacted than men due to the kinds of jobs that have been lost during this recession. This is unlike other recessions in which men are usually more affected by job loss. Men are impacted more when downturns happen in the construction and manufacturing sectors.Women have been forced to step back from labor force to take care of schooling, and women are more employed in leisure/hospitality/health industries and those sectors have been hit very hard.
- There are 3 channels through which COVID has affected the economy: the income channel, the wealth channel, and the sense of uncertainty.
- Regarding Income: income has declined quickly with job loss. This income loss was mitigated somewhat by relief checks, PPP loans, and extended unemployment benefits.
- Regarding Wealth (stocks, bonds, real estate): wealth usually declines in recessions. However, in this recession, the stock market has come back very quickly, fueled by tech stocks. There is $1.6 trillion in excess savings and interest rates are very low.
- Regarding Uncertainty: uncertainty may delay large capital expenditures by companies.
Dr. Rossell talks at some length about residential real estate. I found this information to be very helpful. The residential real estate section starts at the 55 minute mark in the video. She says:
- Unlike in 2008 and 2009, the real estate sector should lead the economic recovery.
- The boom in residential real now is happening because:
- Millennials are buying their first homes
- People are moving out from more dense areas into areas with more space, yards, and square footage. People need different homes to reflect lifestyle changes that are not temporary. The work from home dynamic is not going away. Changes to way people live and work will be permanent.
- Over 50% of firms intend to continue some flexible work from home programs because workers value it, apparently to the tune of about 8% of their compensation. Companies like to have employees work from home as they can decrease their commercial space and productivity has been shown to go up.
- People are incorporating these needs into their home purchases- house buyers need a zoom room, a home gym, a space to home school kids.
- There have been a record number of mortgage originations and real estate has been the strongest sector of economy.
- Commercial real estate will be impacted more than the residential sector. Office space and retail space may bear the brunt as demand lowers.
If you are interested in learning more about the economic forecast, I recommend watching the video for more context and to see the visual aids presented. If you do, let us know what you think!
If you enjoyed this blog, check out HOME DESIGN TRENDS FOR 2021- WHAT’S IN & WHAT’S OUT
Until next time!