During his first-ever visit to Wilmington, a top economist in the real estate industry said Tuesday that the area’s economy seems poised to continue on a path of improvement, for real estate and other indicators.
Lawrence Yun, chief economist and senior vice president of research for the National Association of Realtors, pointed to the Wilmington area’s job growth, and that of the state, as a positive factor in ongoing increases in commercial and residential real estate activity. Yun spoke Tuesday morning during the Realtors Commercial Alliance of Southeastern North Carolina's annual Commercial Day event at The Terraces on Sir Tyler, touching on topics from gas prices to rising rental rates.
On the topic of employment numbers, Yun noted that Wilmington’s job creation rate was nearly three times greater than that of the nation from 2000 to 2015.
“Now you are fully recovered and are almost ready to set new highs,” he said.
And that job creation is helping to boost commercial activity, Yun said. “Commercial real estate prices are now beginning to bounce back,” he said.
That’s especially good news for commercial members of the Chicago-based NAR, whose activity declined by 90 percent or more during the economic downturn and whose bottom lines were slower to recover than those who sell homes, Yun explained.
Job creation is more active in the realm of warehouse occupations than in the retail industry because of the growth rate of online sales versus brick-and-mortar, he said. According to data he shared Tuesday with an audience of residential and commercial brokers, bankers and other members of the area's business community, e-commerce is growing at 15 percent while the same number for retail sales is at about 5 percent.
“More and more people are buying through the Internet, so the warehouse buildings are becoming more attractive in relation to the retail spaces,” Yun said, quipping that by “attractive” he didn’t mean aesthetics.
“This is a trend that I think is likely to continue ... growth of the Internet is here to stay,” he said.
A recent survey of NAR commercial members showed that most of their business falls in the range of transactions worth $500,000 or less. Yun said such deals often rely on lending from regional and local banks and credit unions, but additional financial regulations in the form of the Dodd-Frank Wall Street Reform and Consumer Protection Act have led to the question of whether recovery could be hindered by the pressure those stricter regulations are placing on smaller lenders.
As a result, Yun said, the NAR is lobbying for federal lawmakers to consider relaxing those rules for the thousands of small banks and lenders that commercial transactions rely on.
Touching on another residential real estate issue, Yun noted that rental rates are on the rise in Wilmington and the nation. “Rent is rising, rising and rising, and it’s at a seven-year high,” he said.
With gasoline prices at a low, a factor that masks inflation rates, those rising rents will likely begin to drive inflation, Yun said, predicting a resulting 3 percent cost of living increase in Social Security checks by 2017.
Residential rents are expected to continue to rise, he said, because “rental vacancy rates are at 30-year-low levels.”
Asked about the impact of a lack of wage growth in the area and increasing rental rates, Yun said, "When rents rise, that generally tips people into buying a home." But among some renters, this isn't happening he said, because rental rates are increasing faster than wages and eating into savings.
One silver lining, Yun pointed out, is that with falling unemployment rates and rising employment, the tightenting labor market could lead to companies outbidding each other for workers and wages rising. He said one part of the wage picture that poses questions is why, given recent pushes to raise the minimum wage, there's a shortage of construction workers throughout the U.S., when construction jobs on average in many cases pay two to three times the nation's minimum wage.
Providing a forecast for next year, Yun said he predicts interest rates will rise in December. He also said he predicts 3 percent growth in the overall economy in 2016, but the rise in the nation's debt remains a concern.