Economic Recovery Unfolds Slowly, says Jim Gaines

HOUSTON – (By Michelle Leigh Smith for Realty News Report) – Until COVID is under control, nothing is for sure.  Texas A&M University’s colorful Real Estate Research Center’s chief research economist James P. Gaines says, “There isn’t an economist in the world who knows what the heck is going on in terms of forecasting the future.”  He spoke at a seminar hosted by Community Development Strategies Tuesday, sharing that the increase in household spending, the fiscal stimulus, pent-up demand and savings has helped sustain some of the recovery.  He sees the Delta variant impact and continuing uncertainty with the major supply chain inventory as problematic.  If the Delta variant hadn’t hit, we’d probably already be recovered.”

The TAMU’s Real Estate Research Center is the primary real estate research organization in the state of Texas.

Jim Gaines

“The major federal stimulus packages have fueled some recovery, but not as much as expected,” says Gaines.  “When you shelter in place, you don’t spend as much, even with the Amazon spending. Couple that with the 21 million jobs lost in April of 2020, and recovery is a tough row to hoe.”

It’s been a year of extremes – the GDP in the second quarter of 2020 was the worst on record (-31.4%) and the third quarter of 2020 was the best on record (33.4%), but they still didn’t offset each other.  For the year 2020 was, the U.S. was at -3.5% for the year, a better showing than what we saw in the U.K, a -9.9% change, the – 8.3 in France and Germany at -5%.

“We were expecting a 7.5 to 8.5% increase in GDP in 2021, but the Delta variant has lowered the expectations at least a full percentage point.  We still have 8.4 million people still unemployed. The total US Nonfarm employment working as of August of 2021 was 147.2 million compared to $152.5 million who were working in February of 2020. That’s a 5.3 million left to go before full recovery, so we’re about 96.5% back to where we were in February 2020.

“The Delta variant has lowered expectations and says Gaines. “We’re seeing a `hump over’, and we are recently seeing a downward trend in reported cases, a downward trend now that we hope will continue to fall faster.”

During his 15 years at the Center, Gaines has specialized in housing and land development issues. He is author of more than 50 Center reports and articles and is the organization’s principal speaker.

“With the significant uptick in inflation, the Consumer Price Index could stay here another couple of quarters at over 5%, then come back to 2-3% range by the end of the year. If wages start to go up significantly, we’ll see a 4-4.5% range in the next year or two.

“Although I had predicted the 3.5% mortgage rate by year end, it’s hovering around 3% for the balance of the year,” says Gaines.  Looking six months out if inflation is persistent, and shortages of new home construction materials, cars (due to the lack of silicon chips) and other consumer goods continues, prices will continue to go.  Builders are having a hard time getting windows, doors, appliances and LED lights and are currently running a backlog of unfinished houses that have been contracted.  In January of 2020, the Saudis and Russia decided to have a price war and the price of oil fell just before the onslaught of the pandemic, so the state’s economy suffered a double whammy.  Reopening the economy will take all of 2021 and we’ll continue to see some struggle on the job front.  Consumer attitudes and spending has picked up, and business entrepreneurship has been robust. Historically, housing has been the leader – first thing to go down, and first to come back up. Housing continues to be strong, but the housing sector is not leading the U.S. recovery upwards because the rest of the economy is still sluggish.”

Previously, Gaines spent 16 years with KPMG and Arthur Andersen providing real estate consulting services. He also served five years as president of the Rice Center; an urban research center affiliated with Rice University.  His decades of experience included a broad array of professional activities, primarily in real estate research and education, urban economics, land-use analysis and development, and project risk assessment. Gaines has worked extensively with major corporations, developers, investors, financial institutions, and government agencies across the country.

In 2019, Gaines was part of the Texas Realtors delegation representing the United States at the MIPIM 30th Engaging the Future conference in Cannes, France.

Sept. 29, 2021 Realty News Report Copyright 2021

Dr. James Gaines authored the introduction to the book Houston 2020: America’s Boom Town – An Extreme Close Up  by Ralph Bivins. Available on Amazon  

Houston 2020 Ebook version      

Skyline photo credit: Ralph Bivins, Realty News Report Copyright 2021

File: Economic Recovery Unfolds Slowly. Jim Gaines.

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