Presentation Transcript

1. Economic & Real Estate Bright Spots Blind Spots K.C. Conway, MAI, CRE Chief Economist | USA Colliers International KC.Conway@Colliers.com State of Atlanta September 20, 2013 www.colliers.com/us/kcconway
2. Two Questions to Think About: What are the Real Vs. Artificial Demand Drivers in today’s economy? #1 – The FED’s Monetary Policy & GDP #2 – Housing Recovery QE 3 #3 Energy & On-shoring of Manufacturing #4 Re-making Global & U.S. Supply-Chain "OPEC forecast demand for its oil in 2014 is 29.61mm barrels per day down 250,000 barrels per dayfrom 2013. It cited rising non-OPEC supply from the U.S."
3. Questions to Think About: What are the Greatest Risks to the U.S. Economy? Fiscal & Monetary Policy 10% of GDP & QE = <2% GDP Turmoil in the Middle East & Syria Entitlement Costs & ObamaCare A Dysfunctional DC (Congress, FED, etc.)
4. Bernanke slide Spring 2007: Real or Artificial Demand Drivers - AGAIN! We had a lot of demand being generated from factors not tied to JOBS: i) investors; ii) speculators; iii) subprime mortgages. Population Growth, Baby Boomers, Gen X, Gen Y Securitization, Immigration Loan Servicing Existing Homes Carrying Costs Employment, Income, Finished Inventory Demographic Interest Rates, Alternative Draws on Investments Lending Lines Economic Starts Loan Payoffs Liquidity Construction Supply Demand Owner Cycle Occupied Developed Lots Raw Land Home Sales Affordability Underwriting Recent Price Appreciation, P&C Insurance, Construction Property Taxes, Loans NINJA Loans (No Income, No Job or Ability to Pay) Cost of Living, Credit Scores, Acquisition Exotic Mortgages, Liar Loans, Loans Second Mortgages NINA Loans We had a lot of Supply ramped up to meet this DEMAND that can’t stop on a dime. Condo Conversions CRE Loans Investors, Federal Reserve Bank of Atlanta – Supervision and Regulation Flippers
5. Real Estate Cycle Where are we? What are the CRE drivers? The Real Estate Cycle – We are still in Recovery Jobs – A new ICEE-Age (ICEE v FIRE) Manufacturing – Cheap Energy Vs. Labor Port Markets & a PPMX Supply-Chain The ongoing trend of foreign-based companies setting up stateside operations is creating more manufacturing jobs in the US. Foreign manufacturers are taking advantage of the U.S. market. "The global economics have shifted dramatically. The wind was in our face. Now, it’s a tailwind." According to the Reshoring Initiative, more than 200 companies have brought production back to the U.S over the past three years - creating more than 50,000 jobs. Manufacturers that have recently announced stateside expansions include Airbus, Boeing, Volkswagen, Mohawk Industries, Rolls-Royce, Siemens, and Wisconsin, Crystal Finishing Products (doubled its U.S. production of high-performance coatings over the past three years).
6. Blind Spots: Get the bad news out upfront! Blind Spots
7. Blind Spot s:Value of NFL Franchises Atl. Falcons not a Bright Spot (Jax & Atl 2 weakest in SE) Atlanta # 26 & <$1.0 billion New Orleans #23 & >$1.0 billion Tampa #21 Tennessee # 19 Carolina #18 Miami # 16
8. Blind Spot: FED Monetary Policy & Interest Rates Is the FED really tapering QE? Why doesn’t the media report QE-3 as: “The FED’s $1.02 trillion annual bond-buying program?” A cut to $65b from $85b simply matches the revised 2013 Fed deficit. QE 3
9. Blind Spot: GDP – It is likely to remain below trend! U.S. is below trend most of past decade; 1H2013 GDP to be weakest in 4 yrs!
10. Blind Spot: Unemployment It’s worse than 7.3% - Which “U-rate” is FED targeting for 6.5%? U-3 Vs. U6 Unemployment Rates are the equivalent to: “Make it up” Vs“Count them all” Rates of Unemployment.
11. # 4: Housing – Both a Bright & Blind Spot HPA and NAHB Improved markets Index look bright - even déjà vu? Home Prices Rise in 41 of 50 States Q1 2012 to Q1 2013 – FHFA Home Price Index
12. Bright Spot – Housing The NAHB IMI – Improved Markets Index http://www.nahb.org/reference_list.aspx?sectionID=2223 The NAHB/First American Improving Markets Index (IMI) tracks housing markets throughout the country that are showing signs of improving economic health. The index measures three sets of independent monthly data: employment growth (Census); house price growth (Freddie Mac); and single-family housing growth (Census - Permits) to identify the top improving markets . August is 8th consecutive month at least 70% of U.S. metros made the IMI list.
13. Bright Spot – Housing NAHB IMI – August 2013 (NAHB.org/newsroom)
14. Blind Spot - Housing Forget HPA - focus on H.O. rate, QRM debate, GSE’s future & HMI
15. Blind Spot: The Capital Markets & CMBS A 2nd-Wave of CMBS ReFicomes ashore 2015-2017 & new SIFIs - like GE 2007 CMBS peaked @ $234b 1986 hit $1.0b
16. Blind Spot – Capital Markets & CMBS Translating the CMBS risks to Individual MSAs like Atlanta
17. Bright Spots: As they say on Duck Dynasty, it’s now time to be happy, happy! There is a football connection! Phil (Founder of Duck Commander), played college ball with Terri Bradshaw and passed up going into the NFL. Bright Spot There is also a hairstyle connection.
18. Bright Spot: Bank Failures – GA may not lead in 2013 GA in a 3-way tie with AZ and FL for most Bank Failures in 2013 with 3 each.
19. Bright Spot: Job Growth may be stronger than estimated. Large County Employment – June final estimate In December 2012, national employment, as measured by the QCEW program, was 133.7 million, up by 1.9 percent or 2.4 million from December 2011. The 328 U.S. counties with 75,000 or more jobs accounted for 71.3 percent of total U.S. employment and 77.0 percent of total wages. These 328 counties had a net job growth of 1.8 million over the year, accounting for 73.3 percent of the overall U.S. employment increase. The largest 358 metros created 464,000 more jobs in 2012 than the 1,472,000 jobs previously estimated, a 32% increase from initial employment gain figures. 310 of the 358 metros showed job growth
20. Bright Spot: Jobs… Large Counties other than CA, FL, TX NC & SC have 15 Large Counties & they are producing jobs! North Carolina South Carolina
21. Bright Spot: ONEI MSAs These are the top-102 growth MSAs in the U.S. ranked monthly. Atlanta ranks 48th behind Greenville & Charleston SC, Nashville & Tampa. The On Numbers Economic Index measures the relative vitality of 102 major metropolitan areas with populations of more than 500,000. Its 18-part formula assesses private-sector job growth, unemployment, personal earnings, housing-price appreciation, and construction and retail activity. http://www.bizjournals.com/bizjournals/on-numbers/
22. Bright Spot: Ports
23. Panama Canal Locks Expansion Project A Picture is worth a thousand words – First look at Locks being delivered 12,500 TEU 5,000 TEU 3,000 TEU r
24. Bright Spots 2H 2013 Port Trends: SE Growth
25. Bright Spots 2H 2013 Port Trends: Inland Ports
26. Bright Spots 2H 2013 Trends: Rail & Intermodal Port Rupert Is Q2 2013 a blip for Union Pacific, or … Union Pacific: Serves West coast ports; Least amount of coal moved; Most Asia exposure; Q2 2013 only Class I RR with down volume and revenue. Port of Mobile (deepest in Gulf)
27. Bright Spot: Growth in E-Commerce Retail Sales
28. Bright Spot: Growth in E-Commerce Retail Sales But ….
29. Blind Spot:E-Commerce AFTER July 2013 & Sales Tax E-Commerce Convenience & Value Proposition will offset sales taxes.
30. Bright Spot: Grocery Retailing 3 of top-10 spots on NRF’s 2013 “Hot 100 Retailers” list are grocers.
31. What are the Risks / Opportunities ? Risks Opportunities Monetary Policy & Interest Rates ICEE Vs. FIRE MSAs (Traditional FIRE MSAs becoming ICEE) R.E. Logistics / Supply-Chain LeadershipThis trend is fueling retail & warehouse. Global Political Hot-Spots & Capital Flows Capital Markets & CMBS Refi Wave #2 Capital Markets & CMBS 2015-2017 “Adaptive Re-Use” & Value Enhancement Continued <2% GDP & <200k jobs/month
32. Conclusion: Beezow Doo-doo Zopittybop-bop-bop Source: Dylan Stableford, Yahoo! News – Aug 20, 2013 – Beezow Doo-doo Zopittybop-bop-bop is really the name of an Iowa man who has quite a colorful history with the law. Creatively Re-translated by KC Conway it means: Beezow:Client Response to an error-free, on-time, appraisal report.  Doo-doo: All too often the Client reaction to the appraisal analysis. And … Zopittybop-bop-bop is: How appraisers will feel following future regulatory and education involvement in the appraisal profession by the ASB, APB (recognized appraisal practices board), CFPB and Interagency Appraisal Guidance by bank regualtors!
33. K.C. Conway, MAI, CRE Chief Economist | USA Colliers International KC.Conway@Colliers.com www.colliers.com/us/kcconway

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