The U.S. economy may be going “gangbusters” at the moment, but there are signs of a slowdown by 2020.
“Everything’s on fire” through 2019 economist Elliot Eisenberg told a crowd of housing industry professionals Wednesday during the 2018 New Mexico Housing Summit, which was presented by the New Mexico Mortgage Finance Authority. About 500 people attended Eisenberg’s keynote speech at Hotel Albuquerque.
Signs of a booming national economy are strong consumer confidence and spending, small-business optimism and a rising stock market. Unconventional signs include record purchases of RVs, racehorses and trips to Las Vegas, Nev., said Eisenberg, who shared a wide range of economic projections during a highly energetic presentation.
“There’s nothing like 3.9 percent unemployment to make the world go ‘round,” said Eisenberg.
Eisenberg predicted the tax cut package passed by Congress will provide an economic stimulus through 2019, though the effects will wind down by 2020, shrinking gross domestic product, which hit 4 percent in the last quarter.
Trade tariffs also will hurt GDP growth by 2020 “unless some accommodation” is reached with China, said Eisenberg.
Another area of concern: with baby boomers retiring in droves, labor force participation and productivity gains have been weaker than the historical norm, said Eisenberg. The upshot: labor shortages could become a more serious problem for future economic growth.
Another indicator dragging down the economy in the coming years: The burdens of student loans “have metastasized like mushrooms after a rainstorm,” said Eisenberg.
The main problem with the housing market around the country and in New Mexico is the lack of inventory, said Eisenberg. “We’re chronically underbuilt” for a nation of this size, he said.
Because builders face issues such as a contracting pool of construction workers, higher land and permitting costs, the single-family homes that do hit the market are increasingly higher-end products that maximize profits, said Eisenberg, who specializes in real estate and housing.
“We built 850,000 single-family homes last year,” the economist said during his presentation. “That’s a travesty. And while demand is high, there’s very little builder activity at the newly built starter-home level.
The Albuquerque area is averaging about 1,700 new homes a year, which is insufficient for a market this size, according to local home builder groups.