Fact from Hype: What Lies Ahead
The financial world is overrun with industry wonks and prognosticators—each with a unique ability to predict the future. You’d be better off consulting the Magic Eight Ball than wasting your time with the typical rhetoric and opinion-based fodder. There is an exception however, a shining example of well-researched analysis and comprehensive reporting known as the Beacon Economics Spring 2015 Forecast. If you’re in the market for a loan, take a look at our curated summary of data-driven facts for the California and national economies over the next two years.
U.S. Economic Forecast
Strengths
+ Mortgage credit requirements are easing, helping to sustain the real estate market.
+ Interest rates will remain low in throughout 2015 due to low inflation, excess bank reserves, and a global demand for U.S. Treasury bonds that will restrain bond yields.
+ Domestic demand is picking up and will push growth to the 3% range for 2015.
+ Three million new jobs in 2014 have buoyed consumer confidence.
+ Demand for U.S. exports will increase as the global economy improves, with some of those gains being offset by an appreciating dollar.
+ Current slow growth in the global economy and an oil surplus relative to demand will continue to hold down oil prices.
Challenges
+ Excessive cash in the global economy may lead to over-valuation of assets and/or the mispricing of risk.
+ Continuing congressional gridlock will thwart reform efforts of all types.
+ With revenues increasing, cities and states are less likely to institute necessary long-term reforms.
+ Sluggishness in the global economy will reduce demand for U.S. exports.
+ The rising dollar makes U.S. exports less competitive.
The California Forecast
Strengths
+ Employment growth should reach the high 2% range in the next year.
+ Unemployment should dip below 6% by late 2106.
+ The housing market will continue to improve.
+ Housing appreciation will settle into a more typical 4% – 6% range.
+ 100,000 housing unit permits are anticipated this year.
Challenges
+ The chronic undersupply of homes and its impact on affordability.
+ A regulatory environment that discourages growth in certain underperforming industries.
+ Serious unresolved infrastructure issues threatened long-term growth.
+ Cumbersome state tax codes impose onerous burdens on California businesses.
+ The state’s reliance on highly cyclical revenue sources weakens long-term budget stability.
by Brian Whitney, Commercial Mortgage Banker