Jones Lang LaSalle

SPECIAL REPORT: Economists Predict Strong '06, Uncertain '07 January 12, 2006
By Amanda Marsh, Staff Writer & Russ Colchamiro, Executive Editor

Skies are clearing for 2006 with a possible chance of clouds in 2007 for the real estate economy, noted two economists who spoke today in New York City at the Urban Land Institute's Economic Forecast presentation.

Mark Zandi, chief economist for Moody's/Economy.com, and Tim Hopper, PhD, senior economist for Reis Inc., both painted a positive picture for the upcoming months in all market sectors, basing their optimism on a strong national economy, falling unemployment rates and low inflation.

"I am particularly optimistic about '06," Zandi said. He pointed to the business community as a whole, where companies are expanding and profitability is high. "It isn't a question (of whether) companies can expand," he added "(but) are they willing to?" Hopper said that continuing capital flows and investor interest suggest that there will be further improvements for commercial space and flat returns in the consumer markets.

As for next year, Zandi noted that higher energy prices and rising inflation and interest rates are possible threats, especially to the housing market, with lower-income households being the most vulnerable. And Hopper predicted that upcoming federal fund rate increases might bring an end to consumer spending growth, higher investment costs and slower economic expansion.