Houston Business Journal - by Jennifer Dawson
With the mid-term election behind us and the year drawing to a
close, two recent real estate events featured prominent economists
to help the business community brace itself for what will happen
next.
The Urban Land Institute and the Real Estate Center at Texas
A&M University hosted a sold-out crowd earlier this month for a
2011 Forecast Conference. Speakers included Mark
Dotzour, chief economist and director of research at
A&M Real Estate Center; and Bill Gilmer,
senior economist and vice president of the Federal Reserve Bank of
Dallas.
Barton Smith, University of Houston economics
professor emeritus, spoke to a more intimate group of about 100.
The former director of UH's Institute for Regional Forecasting, who
recently retired, spoke on Nov. 16 at an invitation-only event held
by
Parkway Realty Services LLC. The speech
was touted as a first annual event by Parkway, which handles
leasing and management for office buildings in Houston as well as
other large markets. Parkway has also commissioned Smith to write a
quarterly report on the economy.
The experts agree that it is going to take a while to recover
from the recession, however local job growth is expected to return
in 2011.
Here are a few key points made by each prognosticator:
Barton Smith
• There will be no job growth in Houston for 2010. The city can
expect job growth to begin again in February or March. The city
will add about 30,000 jobs in 2011, for a 1.4 percent job growth.
Houston can expect to add 55,000 to 58,000 jobs in 2012, for a 2.1
percent to 2.2 percent job growth.
• Good news: the United States gained 150,000 jobs in October.
However at that rate, it will take five to six years to return to
pre-recession job levels.
• "The economic recovery seems painfully slow. And we have a
long way to go." And he added that Americans have had unrealistic
expectations of how long it would take to right the ship.
• Japan experienced a big decrease in commercial real estate
values in 1991. By 2000, Japanese banks still had 85 percent of
that bad debt on their books. U.S. banks still have a lot of "junk"
on their books that needs to be cleared out if the U.S. is to avoid
the horrible economic conditions that beset Japan. "Japan had a
hard time with their reality check. We need to accept the new
reality and get on with it."
• "The commercial real estate market has a long way to go before
it will correct." The foreclosure moratorium sounds very
"Japanesey."
• "New home production must remain subdued for at least two more
years."
• "We have serious fiscal problems in the City of Houston. We
have serious fiscal problems in the State of Texas."
Mark Dotzour
• "The U.S. economy is turning the corner, slowly."
• Forty-eight percent of all job growth in the nation last year
was in Texas.
• Commercial real estate will be a hot investment class in the
next three to five years, if government agencies will let banks
sell distressed properties.
• The
Office of the Comptroller of the Currency
is telling banks not to make commercial real estate loans, but
there's a big difference between a loan for a doctor who wants to
build his own clinic and a loan to a developer who wants to build
five million-dollar spec homes.
• America needs "go" signals from Congress to spur entrepreneurs
and job growth.
• The U.S. government needs to cut spending and America needs to
live within its means. A necessary time of austerity has been
delayed by foreclosure postponements, foreclosure moratoriums,
federal subsidies to states and cities, extended unemployment
benefits and tax credits to buy goods.
Bill Gilmer
• Texas can expect job growth of 250,000 positions in 2011.
• Banks in Texas are twice as exposed on commercial real estate
loans than the rest of the country, though other markets are more
concerned with troubled residential real estate loans.
• Many of Houston's oilfield services companies would not suffer
too much if an oil rig is moved out of the Gulf of Mexico, because
they will service the rig no matter where it is located.
• In 2009, the world experienced the first-ever contraction in
worldwide economic growth.
• "We have hit the bottom. The recession is over."