The Chief Economist of Fannie Mae Comes to San Jose
SAN JOSE, Calif., June 5, 2018 /PRNewswire/ -- Over 270 real estate investors gathered at the Bay Area Commercial & Multifamily (BACOMM) event last Thursday to see the Chief Economist and Senior VP of Fannie Mae, Dr. Doug Duncan, give his economic state of the union and forecast.
Named one of Bloomberg / BusinessWeek's 50 Most Powerful People in Real Estate and awarded for being one of the most accurate economic forecasters, Dr. Duncan is Fannie Mae's source for information and analyses on the external business and economic environment, the implications of changes in economic environment to the company's strategy and execution, and forecasting for housing activity, demographics, overall economic activity, and mortgage market activity.
At the event, Doug Duncan shared:
- In January 2017, Duncan and the Fannie Mae forecast team called the number of housing starts, new and existing home sales almost exactly as they happened.
- The new tax bill is expected to reduce revenues more than increased growth will fill in for expenditures. Although we will see a near term stimulus in our economy, long term and outstanding debt will rise.
- While significant deregulation didn't occur, a major reduction of new regulation issuance did occur. Subsequent to the past presidential election, the confidence of small businesses saw the largest jump ever recorded in the NFIB survey of small business.
- Companies used money repatriated from offshore primarily to buy back stock. Some companies gave one-time employee bonuses, which have no long lasting impact on economic growth.
- Risk in corporate loans are rising through what are considered "covenant-light" obligations. Shadow banking is a major source of funding of these loans and it appears that liquidity issues in this market are a potential "shock" that could trigger the next recession.
- There are many upward pressures on interest rates that have nothing to do with inflation including the Fed's ongoing reduction in the size of its portfolio. The Fed will likely raise rates in June and again in December.
- As predicted, Millennials are moving out of their parents' homes, and are creating new households and buying homes.
- Boomers are staying in their homes and remodeling as they have said in surveys. They want their kids to come visit and bring the grandkids.
- The last bubble had 3 primary causes: serious erosion of credit underwriting standards of mortgages, speculative over-building of houses, and proliferation of securities backed by subprime mortgages. None of these exist in any significant way today.
- A "bubble" is defined as a price level unsupported by fundamentals. Today, supply shortage is driving demand. It is very much a fundamental price increase, not a bubble.
BACOMM is a dynamic, new, and rapidly growing real estate investment club committed to educating investors of all experience levels to advance to a more sophisticated level of investing. Visit www.BACOMM.club to learn about upcoming events and watch us on livestream.
BACOMM is sponsored by Wilson Investment Properties, a leading syndicator of commercial & multifamily investment properties starting at $50,000/share. Its principal, Tom K. Wilson, is a 5 decade real estate investor veteran who has bought and sold over 4,000 units and over $450M of real estate across the country. Tom is also the host of Real Estate Radio POWER Investing on KDOW 1220 AM. Visit www.tomwilsonproperties.com to learn more.
Bay Area Commercial & Multifamily Investment Club (BACOMM)
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