Economic Indicators Affecting Boise Real Estate
Hopes soared on reports that the recession was coming to a close as the United States economy posted a healthy 5.9% gain and businesses invested to boost GDP. Boise real estate always depends on the national economic trend, so good news will help out.
It was estimated that Gross Domestic Product would increase at a clip of 5.7%, instead it grew at a rate of 5.9% according to the Commerce Department, based on fourth quarter financial numbers. Not since summer of 2003 have we seen such a rapid pace of growth in GDP. The fastest quarter was the third quarter which posted a robust 2.2% growth rate. Adding these contributing factors in with local ones, will help stabilize the Boise real estate market.
Major news agencies had indicated that the latter portion of 2009 posted a projected growth of 5.7%, including a total of all products and services inside United States borders. With the recovery seemingly in full swing in the last few months of 2009, our nation seemed to be emerging from the most severe financial crisis since the Great Depression, but that growth has been stymied somewhat in the first quarter of 2010. Considering the housing slump and the low consumer confidence reports, businesses continued to reduce inventories to purchase needed software and equipment which all added up to a boost in fourth quarter numbers. This wan’t just a national trend either, as the Boise real estate market saw very similar changes in volume as well.
Demand remains low as indicated by the reduction in actual growth of 1.9% from the projected growth of 2.2%, which reduced inventories and brought some balance back. Inventory values were adjusted down from $33.5 billion initially, to $16.9 in the fourth quarter. There was a signification reduction from July to September of $139 billion. The Gross Domestic Product was increased by 3.88% simply by the difference in inventory in that quarter. Since 1987, inventories had not influenced GDP in such a substantial way. With so many suppliers eliminating excess inventory, builders in the Boise real estate market were helped out.
As a whole, the year 2009 featured the most dramatic decrease in GDP, at 2.4%, since the post World War II recovery of 1946. Even consumer spending projections had to be adjusted downward from 2% in January to the actual number of 1.7% increase. In the preceding quarter, the federal government “cash for clunkers” program lifted GDP by 2.8%, which was obviously a short term fix for a sector of the economy. In the fourth quarter, consumer spending – which normally accounts for about 70% of U.S. economic activity — contributed 1.23 percentage points to GDP. In such a financial crisis, the Boise real estate market is not independent of the national trends.
With spending on commercial real estate heading down quickly, the fact that the growth happened at all was due mostly because of equipment purchases and investment in software necessary for business growth and improvement. With business investment being much higher than the projected 2.9%, at 6.5% actually, improvement is on the way. It had dropped 5.9% over the prior three-month period. Spending on new home construction grew at a slower 5% rate in the fourth quarter, instead of 5.7% estimated last month. With growth as high as 18.9%, the third quarter was a busy one. Both exports and imports grew much stronger than initially estimated in the fourth quarter, leaving a trade gap that contributed 0.3 percentage point to GDP growth, the data showed. In the Boise real estate industry, the GDP and other market factors are closely watched.
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