February 2018
Now’s the Time to Try Out that Great Idea
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“It’s as good as it gets,” said Economist Elliot Eisenberg with regard to the economic outlook for 2018. Eisenberg spoke to a crowd of about 250 at the HBA’s 2018 Economic Forecast Breakfast on Jan. 30 at the DoubleTree in Overland Park. “It’s not the highs of 2007 but the economy is good,” he said.
Kansas City. The labor market hasn’t been this tight since 1999, according to Eisenberg.
Eisenberg said unemployment is hitting historic lows both nationally and in Kansas City. The stock market is doing amazingly well, inflation is low and household debt is in good shape.
Within the real estate industry, Eisenberg said the inventory of existing homes for sale has been shrinking for the last 31 months and demand for multi-family is also declining as Millennials start families and look to purchase homes.
“There is no housing bubble,” Eisenberg noted. He did mention one aspect of the economy that is not doing as well: gross domestic product (GDP) is still growing at only a 2.1-2.3 percent rate. “It’s not going to get better,” said Eisenberg. The only way GDP will grow is if more people enter the workforce and the workforce as a whole works better (productivity) but both are currently in decline, according to Eisenberg. New competitions at the Home Show – page 6
Currently, the national unemployment rate hovers around 4 percent — and a little lower than that in
“We are out of people,” said Eisenberg.
Eisenberg confirmed that Millennials are waiting longer to purchase their first home due to their level of student debt. Fifteen years ago, student debt was one of the smallest debt classes, but today it is one of the largest debt classes (second only to mortgage debt). This is lengthening the time it takes for Millennials to purchase their first home — but they will purchase eventually, Eisenberg believes. Besides waiting longer to purchase a home, Eisenberg also believes the biggest challenge for home builders is the need for entry-level homes for Millennials. The in-
dustry is building large, 2,400-square-foot or larger homes but what needs to be built are 1,400 square-feet, $250,000 entry-level homes, he told attendees. “You’re building the wrong homes,” said Eisenberg, “but I understand why — because you have to, given the rising cost of materials, increasing regulatory burdens and shortage of labor.” Continued on page 2