Part One: CAR’s 2016 predictions

Happy New Year! Here’s hoping that 2016 brings you all the joy in the world. To welcome in the New Year, we’re kicking off a series of posts on the California Association of Realtors’ predictions for 2016.

 

CAR’s 2016 California Economic & Market Forecast takes a pretty in-depth look at what’s expected to come not only in the next 365 days, but what’s trending for the longer term. Today we’ll start to investigate that report.

 

With the Fed postponing – but not cancelling – its planned interest rate hike, CAR details a few factors for the delay. These include:

 

  • Global economic slowdown
  • Strong dollar
  • Emerging markets that are vulnerable to the rising rate environment, which in turn heighten stock-market volatility
  • A possible economic slowdown due to negative wealth effect
  • The Fed’s failure to adequately explain the effects of the hike and its wish to avoid surprises – and, likely, repercussions from those surprises.

 

So where are we headed? Here are a few predictions:

 

  • Fed is likely to begin normalization in December, with rates gradually increasing during next year as well as 2017
  • There is a risk of overly rapid rate increase, halting economic growth
  • Conversely, there is a risk of rates not increasing quickly enough, bringing zero leverage when the next downturn hits.

 

CAR says that the real estate market is down sharply from its peak. A few causes of financial-market turmoil:

 

  • Highly valued asset markets
  • Economic slowdown in China
  • S. monetary policy normalization
  • Collapse in energy and other commodity prices

 

Tomorrow we’ll continue our look at the CAR report and present Paragon’s own 2015 year-in-review.

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