Idaho Housing Market. Home prices continued to rise slightly across the nation and in Idaho in March.
Home prices in Idaho increased 1.4 percent from February to March, and have risen 7.3 percent since March 2015. Nationally, home prices increased 2.1 percent month over month and 6.7 percent year over year. National home prices for single-family homes, including distressed sales, are forecasted to rise by 0.7 percent in April 2016, and by 5.3 percent by March 2017.
Although home prices remain 5.4 percent below peak values recorded in April 2006, the U.S. has experienced 49 consecutive months of year-over-year increases, including distressed sales, which indicates progress towards a full recovery. A new peak level in home prices is expected to be reached in April 2017. In Idaho, home prices are forecasted to increase 0.9 percent this month and 4.5 percent in the next year. Increasing prices in Idaho are driven by a variety of factors, including an improving job market and a wealth of boomerang buyers—buyers who lost homes during the recession but have repaired their credit and are again looking to buy homes.
U.S. Economic Outlook
Short-Term Outlook. U.S. gross domestic product (GDP) increased 0.5 percent in the first quarter of 2016 according to the Labor Department’s advance estimate released in late April. This represents the slowest annual rate since the first quarter of 2014. Economists had forecast GDP growth of 0.7 percent in the first quarter. The economy grew 1.4 percent in the fourth quarter of last year. Almost all sectors of the economy weakened in the first quarter, in part due to the ongoing saga of cheap oil. Facing severely-reduced profits, oil and gas companies have cut business spending and contracting, reduced numbers of employees, and put off investing in new projects. Manufacturers have also felt the pain of decreasing oil prices.
On the other hand, the housing and labor markets were robust in the first quarter, and employment gains still averaged 209,000 jobs per month. GDP growth has consistently slowed in the first quarter over the past several years, usually due to severe winter snow storms on the East coast. This year, oil prices had a larger impact than did weather.
Also in the first quarter, consumer spending increased at a rate of 1.9 percent. Economists pay close attention to consumer spending because it indicates confidence in the economy and accounts for more than two-thirds of U.S. economic activity. Although spending increased, this was the slowest increase since the first quarter last year. In addition, consumer spending in the first quarter of 2016 represented a deceleration compared with consumer spending in the previous quarter. While consumers have saved money at the gas pump, they have also cut back on automobile purchases. Rather than spending the difference, consumers appear to be saving it. Disposable income after taxes and inflation increased 2.9 percent after rising 2.3 percent last quarter. Savings rose to $712.3 billion, up from $678.3 billion the previous quarter. Household debt also decreased. While spending may have decelerated in the first quarter, the increase in household savings sets consumers up for increased spending in the next quarter.
The Federal Reserve acknowledged that economic activity had slowed, but did not indicate how that would affect the interest rate increase schedule. Amid the slowdown, the Fed noted that labor market conditions have improved.
Long-Term Outlook. The International Monetary Fund (IMF) further cut the global economic outlook in mid-April. It now projects that global growth will move forward at a 3.2-percent pace, as opposed to the 3.4-percent pace it projected in January. Reasons for the cut include China’s slowdown and weak commodity prices. Emerging markets are suffering from the low commodity prices, and wealthier countries are still trying to overcome the effects of the financial crisis.
Recessions in Russia and Brazil have been compounded by political situations. Oil exporters like Saudi Arabia, Nigeria, and Venezuela have experienced sharp economic slowdowns. Until the global economy can get on stable footing, the long-term outlook will remain uncertain and sluggish.