I always love to listen to Dr. Ted C. Jones, Stewart Title’s national economist who served as chief economist at Texas A&M because he puts the “why?’ in big data. He was here December 6 for his annual ‘By the Numbers” chat.
Before he started the speech I asked if we should be freaking out over the tax bill.
“Why would you want to do that?” he asked.
“Because everyone thinks we’ll go over a cliff, and it’s scary,” I responded.
“Well, we don’t know what we’re getting yet. I’ve read the whole bill, and it’s good for the economy in the long run. Let’s debunk some myths.” I already felt better.
Being from Houston, he started the conversation about how 2017 was the year of disasters and how they affect the economy as a whole. This year we’ve seen hurricanes strike Texas, Florida, and Puerto Rico. Fires are raging through California. What happens in the short run is that jobs drop, no one can get to work if there still is a work to get to. Then, Federal money from FEMA, insurance claims pours in to start rebuilding. The economy picks up as people are housed in hotels, eating meals in local restaurants, and begin to replace their homes and cars.
Within the next 12 months, expect to see a massive rebuilding of Florida, followed by Texas. A million cars were destroyed by flooding, car sales are up in the last two months. Disasters kill the real estate market in the short run, but usually rebound 11% higher in the long run. It would be my guess that Home Depot and Lowe’s stock gets an uptick.
Jobs are everything according to Ted. There were 220,000 applications for unemployment by October 14, the lowest it has been in 44 years. We have more jobs today than ever in history. Leisure and Hospitality are at 16 million jobs, a chief indicator of consumer confidence. Who goes on vacation unless they are sure of the job when they get home?
The good news for the Minneapolis/St Paul market is that we’ve added 2.44% new jobs, above the national average. Minnesota is named #3 for Easiest for First Time Buyers, coming in after Iowa and Utah for affordability, jobs and credit. Those are quality jobs and are attracting Millenials from across the country. 30% of home sales are to Millenials with an average purchase price of $319,700 for more mature Millenials, and credit scores over 700. Some surprising myth busters are that 53% of Millenials prefer to work hard for themselves, and take risks as opposed to having a secure job, and 71% would commit to a startup. 95% prefer real life friends versus FB, social media ‘fake friends.’
The Twin Cities is one of the cities where it is more affordable to own than rent. High rising rents are pushing first time buyers into a home of their own. October saw the highest rate of home sales in 10 years. Part of that is recovery from Hurricanes, but shows strong market demand.
Looking towards 2018, Ted’s position on the future is that the tax cut would be good for business in the long run. We tax business higher than all our competitors, and it would be a stimulus for most businesses. He pointed out that the average worker is making 2.4% more today than a year ago, and businesses with more money tend to expand. Wall Street is anticipating a tax cut, and would drop considerably if it doesn’t happen.
What I like best about Ted is that he cuts out the political and media noise from big data, and tells the story of which direction the economy is moving, and why.
Check out my blog at www.raiseurroofmn.com, or give me a jingle so we can plan your 2018.