NAR’s chief economist said what about the housing market?

If it feels like the recession's still on, there's a reason

Lawrence Yun, chief economist at the National Association of Realtors, caught HousingWire’s eye with his recent remarks at the Alabama Commercial Real Estate conference.

Yun gave a decidedly candid assessment of the state of the economy, housing and commercial real estate with a little more red meat, with a little less of the positive that normally comes out of the NAR press room.

HousingWire caught up with Yun Monday and asked him to expand on the central question of his remarks – “Why does it feel like we’re still in a recession?”

“Looking at the economy, last year was overall a sub-par performance with 2% GDP. That is below the historical norm of 3% and it’s been several years of under 3% growth,” he said.

Unemployment is a key factor here, he said.

“This recovery is not feeling right even though unemployment has been declining measurably – from 10% at its peak to 6.6%,” Yun said. “But if you look at the employment rate – not the unemployment rate – you look at how many in the adult population have jobs, and we have not made any progress since the depression began. We are only at 58% of the adult population working now, same as it was in the depth of the recession, and well below the historical trend of 63%.”

And then there is the consumer spending piece of the puzzle.

“Consumer spending has been so-so, muddling along,” he said. “It is implying that consumers are cautious and less confident about the economy.”

That can be seen in business spending, too.

“More importantly with business spending there is a mismatch of the historical relationship between business investment and corporate profit,” Yun said. “”Business investment should follow profit, and that’s not happening. Profit is up but businesses aren’t spending. It implies that businesses are less confident.”

Despite the lack of confidence and the hollow unemployment rate improvement, he still expects growth in 2014.

“Direction wise I see the economy is expanding. I expect 2.5% GDP growth this year. In the 4th quarter growth was solid but that was one quarter. We need that rate to be consistent for four quarters,” Yun said.

Assuming that growth and concurrent job creation, Yun still sees challenges for housing sales going forward.

“Housing affordability is coming down. You have mortgage rates and prices rising in 2014 but it will take growth and job creation on the other side,” he said. “For the year as a whole I think it will be neutral on housing prices.”

Yun said he is already seeing softness in housing readings for the first quarter, and hopes the remainder of the year will be strong enough to balance it out.

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