2020 Economic Forecast

2020 Economic Forecast

By: Drew Doonan

Patti and I recently attended the annual Ted Jones 2020 Houston economic forecast. We have had the pleasure of hearing the wonderful Dr. Ted C. Jones speak on real estate and the economy multiple times and his talks are always insightful and engaging. For those of you who don’t know, Dr. Jones is the Chief Economist and Senior Vice President at Stewart Title Guaranty Company, a very bright man, and someone who never shies away from a joke. Ever since I first heard one of Dr. Jones talks, I’ve been compelled to keep up with him, from his Twitter, to his blog, to his talks. Last month, Dr. Jones spoke here in Houston about the 2020 outlook for real estate and the economy, both locally and nationally, and I’d like to share some of the highlights.

Ted’s theme this year was “The Beat goes on” and we picked up where we left off last year discussing the importance of millennials in our economy. Millennials still represent the largest demographic of home buyers in the marketplace. They are the future and the present of home buyers. They are a key driver in our local economy going forward as they fill their newly purchased homes up with retail purchases and babies.

Another topic that stood out was the discussion of jobs in 2019 and their implications in our economy. Now, take a look at the slides that I pulled from Ted’s presentation.

As you can see, we are experiencing exceptional job growth at a national, state and local level (even with the headwinds of oil prices). One sector that was highlighted was hospitality. The jobs that are being created in hospitality signal strong consumer confidence. The logic behind this is that you don’t take vacations or embark in “leisure” activities if you are concerned about future wages.

Another topic that has come up in the news recently and that came up during Ted’s presentation was talk of a recession. Ted assured us we are not headed into a recession and that the evidence is clear as to why. Retail sales make up 68% of our Gross Domestic Product (GDP) and a recession is defined as two or more quarters of negative GDP Growth. If you look at the numbers below you will see we were positive in all four quarters in 2019 and that retail sales were up 3.35% in November of 2019 versus November of 2018. This signals a strong economy.

Interest rates were another topic of discussion. We are currently at a three year low for thirty-year conventional mortgage rates and expectations are that they stay low. Low interest rates, more jobs and growing millennial families create a great recipe for a strong housing market.

The last theme to mention is home sales. We set several all-time records in 1019. Doonan Realty Group is all about breaking records every year, Ted is predicting 2020 to have positive growth again albeit at a lower pace.

So what can we expect in 2020? What will outperform the market?

Overall, Ted is bullish on our local economy and so are we. Where we see the opportunity to outperform the market is within the following:

• Pre-sale Updates: Millennials and their families want move-in ready homes and will pay for it.
• Good School Districts: In addition, single family homes that are located in good school districts cater to the growing millennial family.
• Townhomes: When looking at townhomes we suggest looking for areas with walkability to distinguish yourself from new construction options.

With that said, Houston’s housing market is comprised of many micro markets and deeper dives are necessary when evaluating. So if you have questions about this presentation and how it compares to your neighborhood or a neighborhood your looking to move to, please don’t hesitate to reach out.

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