Patty Silverstein at REBarCamp Denver


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Patty Silverstein's economic update for Real Estate BarCamp Denver 2010

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Patty Silverstein at REBarCamp Denver

  1. 1. Picking Up The Pieces Metro Denver 2010 Economic Update June 2010
  2. 2. Real Gross Domestic Product Growth Source: U.S. Bureau of Economic Analysis.
  3. 3. <ul><li>Consumption (70%) </li></ul><ul><li>Household spending on goods and services. </li></ul><ul><ul><ul><li>Investment (16%) </li></ul></ul></ul><ul><ul><ul><li>Residential real estate + business spending on software, equipment, & real estate. </li></ul></ul></ul><ul><ul><ul><ul><ul><li>Government Spending (19%) </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Goods and services, debt service, transfer payments/social programs. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>International Trade (-5%) </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li> Global demand for US goods, US import activity. </li></ul></ul></ul></ul></ul>“ Pieces” of the Economy… Each Affected by Recession
  4. 4. Consumer Activity <ul><li>Income </li></ul><ul><li>Wealth </li></ul><ul><li>Prices </li></ul><ul><li>Borrowing Costs </li></ul><ul><li>Consumer Confidence </li></ul><ul><li>Retail Activity </li></ul><ul><li>Housing Sales </li></ul><ul><li>Savings Rate </li></ul>
  5. 5. Population by County 2009 Population = 2.83 million
  6. 6. Metro Denver Annual Change in Population Source: Colorado Division of Local Government
  7. 7. Consumer Confidence Index Source: The Conference Board.
  8. 8. Unemployment Rates (not seasonally adjusted) Metro Denver Total Labor Force = 1.5 million Sources: U.S. Bureau of Labor Statistics; CO Dept. of Labor & Employment.
  9. 9. Colorado Personal Income Growth Rate Sources: U.S. Bureau of Economic Analysis.
  10. 10. Dow Jones Industrial Average Source: Yahoo! Finance. 2007: 18% of U.S. families have stocks; 53% have retirement accounts
  11. 11. Metro Denver Real Retail Trade Sales Growth Rates Source: Colorado Department of Revenue.
  12. 12. Metro Denver Existing Home Sales Source: Metrolist, Inc.
  13. 13. Residential Mortgage Loans in Foreclosure or Delinquent Sources: Mortgage Bankers Association, National Delinquency Survey
  14. 14. Metro Denver Foreclosures Sources: CB Richard Ellis; County Public Trustees.
  15. 15. Median Home Price (in thousands) Source: National Association of REALTORS.
  16. 16. Metro Denver Building Permits Source: Home Builders Association of Metropolitan Denver.
  17. 17. Business Activity <ul><li>Sales Expectations </li></ul><ul><li>Profit Expectations </li></ul><ul><li>Interest Rates </li></ul><ul><li>Other Borrowing Costs </li></ul><ul><li>Human Resources </li></ul><ul><li>Software, Equipment Purchases </li></ul><ul><li>Commercial Real Estate </li></ul>
  18. 18. Nonfarm Job Growth Rates Sources: U.S. Bureau of Labor Statistics; CO Dept. of Labor & Employment.
  19. 19. Metro Denver Net New Jobs Source: CO Dept. of Labor & Employment.
  20. 20. Key Metro Denver Industry Clusters   Employment 2009 Job Growth Concentration Rank (50 metros) Aerospace 19,900 -1.2% 2 Aviation 15,700 -1.5% 10 Bioscience Pharmaceuticals & Biotechnology 5,600 4.5% 18 Medical Devices & Instruments 9,500 1.6% 6 Broadcasting & Telecommunications 41,400 1.7% 4 Energy Fossil Fuels 15,800 0.4% 8 Cleantech 16,300 4.6% 7 Financial Services Banking & Finance 44,000 -0.3% 4 Investments 23,300 0.3% 7 Insurance 26,700 -5.9% 23 IT/Software 42,300 -0.2% 9
  21. 21. Metro Denver Office Vacancy Rates (with sublet) Existing Square Feet = 163.0 million Completed 2009 = 1.6 MSF; Under Construction = 1.2 MSF Source: CoStar Realty Information, Inc.
  22. 22. Metro Denver Industrial Vacancy Rates (with sublet) Source: CoStar Realty Information, Inc. Existing Square Feet =214.7 million Completed 2009 = 0.2 MSF; Under Construction = 0 MSF
  23. 23. Metro Denver Retail Vacancy Rates (with sublet) Existing Square Feet = 155.3 million Completed 2009 = 2.1 MSF; Under Construction = 0.4 MSF Source: CoStar Realty Information, Inc.
  24. 24. Government Activity <ul><li>National Security </li></ul><ul><li>Overall Economic Health </li></ul><ul><li>Tax Collections </li></ul><ul><li>Political Leadership </li></ul><ul><li>Fiscal Policy </li></ul><ul><li>Monetary Policy/ Interest Rates </li></ul><ul><li>Regulatory Reforms </li></ul>
  25. 25. Economic Stimulus Highlights <ul><li>$787 billion American Recovery & Reinvestment Act (ARRA, February 2009) </li></ul><ul><ul><li>Tax Relief (37%), State & Local Fiscal Relief (18%), Infrastructure & Science (14%), Protecting the Vulnerable (10%), Health Care (7%), Education & Training (7%), Energy (6%), Other (1%) </li></ul></ul><ul><li>$700 billion Emergency Economic Stabilization Act (EESA, October 2008) </li></ul><ul><ul><ul><li>Created TARP, which led to the Financial Stability Plan, which includes CPP, CBLI, CAP, TALF, AGP, TIP, SSFI, etc. </li></ul></ul></ul><ul><li>Federal Reserve maintains 0 – 0.25% target federal funds rate </li></ul><ul><li>Other monetary policy actions </li></ul>
  26. 26. U.S. Historic and Projected Budget Deficits by Fiscal Year ($bil) Source: Congressional Budget Office.
  27. 27. Colorado Budget Concerns <ul><li>A state and local “budget tsunami” – lower revenues and higher obligations. </li></ul><ul><li>More than $2 billion shortfall addressed for FY 2009-2010. Further cuts possible. </li></ul><ul><li>Projected shortfall for FY 2010-2011 budget more than $1 billion. Proposed reductions: </li></ul><ul><ul><li>K-12, higher education funding </li></ul></ul><ul><ul><li>Modifications of tax exemptions and credits </li></ul></ul><ul><ul><li>Changes in capital construction, public safety and corrections, Medicaid, and other areas </li></ul></ul>
  28. 28. International Activity <ul><li>Relative Quality, Price of Goods </li></ul><ul><li>Value of the Dollar </li></ul><ul><li>Financial Markets </li></ul><ul><li>Trade Policies </li></ul><ul><li>Exports: Sales of U.S. Goods and Services </li></ul><ul><li>Imports: Purchases of Foreign Goods and Services </li></ul>
  29. 29. Year-Over-Year Growth in Exports Source: U.S. Department of Commerce, International Trade Administration. Key Colorado Trading Partners: Canada, Mexico, China, Japan, Germany Key Products: Computers and electronics, chemicals, processed foods, machinery
  30. 30. <ul><li>Commercial Real Estate. </li></ul><ul><li>Funding a major challenge for maturing loans, new development. Demand for space will be slow to rebound. </li></ul><ul><ul><ul><li>Fiscal Health. </li></ul></ul></ul><ul><ul><ul><li>Tax revenues down sharply and are likely to lag economic recovery. </li></ul></ul></ul><ul><ul><ul><ul><ul><li>Inflation. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Monetary easing, other stimulus policies could fan inflation in coming years. Potential to dampen recovery. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Engine of Growth? </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Not consumers. What will support and sustain recovery? </li></ul></ul></ul></ul></ul>Some “Pieces” Still Out of Place…
  31. 31. <ul><li>Consumer Confidence Rebounding. </li></ul><ul><li>Confidence still fragile, but improved wealth prospects (homes, stocks) helping. </li></ul><ul><ul><ul><li>Residential Real Estate Improving. </li></ul></ul></ul><ul><ul><ul><li>Home prices more solid, foreclosures down, sales activity picking up. </li></ul></ul></ul><ul><ul><ul><ul><ul><li>Employment Stabilizing. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Pace of job losses slowing, but unemployment will still rise. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Stimulus Dollars Flowing </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Federal dollars helping to thwart state budget cuts while offering some job opportunities. </li></ul></ul></ul></ul></ul>… But Other “Pieces” Starting to Fit
  32. 32. Development Research Partners 10184 West Belleview Avenue, Suite 100 Littleton, Colorado 80127 (303) 991-0070 Patricia Silverstein, President [email_address]