Yesterday I had the privilege to hear an economic report on the nation from one of the top economist in the country, Dr. Lawrence Yun, lead economist for the National Association of Realtors. My initial thought, along with the few people who I told I was going to heara talk onthe nations economy was, "that will be depressing." But to my surprise, and to great relief, I actually walked away from the talk feeling the best about our economy I have felt in years, especially Denver's economy and housing market.
I heard Dr. Yun speak about two years ago and looking back over the notes I had taken at that time, I was amazed about how accurate his predictions turned out to be. He predicted the recession, the low, low interest rates, and also a leveling off of the housing bubble that he attributed then and now to the maincause for the recession.
So after hearing him predict over and over again with plenty of evidence to back up his theories, I now feel confident that his prediction that we are out of the recession and two to five years away from returning to what we consider a "normal" economy to be very realistic.
Looking back at the previous five to twenty years,Dr. Yun explained how this credit bubble of lending money way to easily led to the housing bubble of false home values and speculation which he believes caused the problem we are in today. Now looking at the credit world, be believes we have reachedthecomplete opposite side of the spectrum. Today, banks are being toostringent in lending money and as aresult, only the most qualified are able to buy. The loans created in 2010 are the best loans FHA, Fannie Mae and Freddie Mac have ever seen, meaning they have the least chance of leading toforeclosure. While this is encouraging that better loans are being made, italsomeans that money is not being lent easily enough and this lack of available money is holding our economy back from continuing to grow.
As the credit bubble adjusted the past few years, Dr. Yunstated the housing market has adjusted as well. Providing countless statistics, he showed how the bubble in the housing market we sawfrom 2003 to 2008ish has disappeared across the country and home prices on average now fit perfectly into historical models, if not a littlebelow the historical average. Comparing Denver's stats to the nations, we have outperformed the nation in almost every catagory, further proof that we have bottomed out and prices areonthe way back up.
In speaking more specifically about Colorado, Dr. Yun predicts that our state is set for moderate recovery in the next few years. If you look at migration patterns across the country, the greatest domestic migration is heading to theRocky Mountain Region, especiallyColorado.This trend will continue and withlong term job growth looking strong for Colorado, demand for housing in Colorado will continue toincrease andpricesshould graduallyrise.
The return to a "normal" economy, what we experienced in the early 2000's,relies on businesses spending money. Businesses across the country have the highest reserves they have had in years and once they start spending this money, jobs which we so desperately need will be created. If 400,000 jobs are created a month across the country, we will be back to normal in 2 years.
Housing is second most important factor in a return to normalcy. If winter month sales, those from December to March match the previous winters sales, this will be an excellent indication the market is back to normal andcome spring,Real Estate sales will be the best we have seen in many years. Combine this with interest rates expected to increase to at least 5%next year and 6% in 2012, you can see why now is such a perfect time to invest in Real Estate, especially in Colorado. Compared to other states across the country, Dr. Yun is especially bullish on Colorado and expects us to lead the country on the road to recovery. He stated numerous times that his views are conservative and results down the road could easily be better. I for one am confident we can get there and have my fingers crossed for good sales data come March.
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