Economic Forecast Delivered at Lehigh Valley Real Estate and Development Symposium
By Colin McEvoy on March 6, 2015
The economy will continue to grow in 2015, unemployment rates are improving, and consumers are feeling more optimistic. The Federal Reserve will probably increase interest rates in the third quarter, and employers will start feeling pressure to raise wages.
Those were among the major points Jim King, president and chief information officer of National Penn Investors Trust Co., made during his keynote speech at the Lehigh Valley Business 2015 Real Estate & Development Symposium on March 3.
“The Lehigh Valley has been at the forefront of innovation nationwide,” King said. “All of you who have participated in this activity should be very proud of what’s happening here.”
More than 500 construction, real estate and economic development professionals came out to DeSales University in Upper Saucon Township for the symposium, of which the Lehigh Valley Economic Development Corporation (LVEDC) was a major sponsor.
Topics of conversation included the economic forecast, major projects in the Lehigh Valley, and “what’s hot and what’s not” in regional commercial, industrial, office and residential real estate.
LVEDC President and CEO Don Cunningham spoke of growth in the Lehigh Valley’s logistics sector, including e-commerce, warehousing and transportation. Behind only the medical and health care field, it is the second fastest-growing sector in the region, with about 20,000 new jobs, including 5,000 added in the last four years alone.
Cunningham said manufacturing is the Lehigh Valley’s second-largest sector in terms of GDP. He also noted an increase in international companies showing interest in the Lehigh Valley. Fuling Plastic USA, the region’s first Chinese-based manufacturer, is expected to open its new facility in Upper Macungie Township by the end of this quarter.
Out of about a dozen prospect recruitments the LVEDC is undertaking right now, about a third are international companies, Cunningham said.
“What we’ve seen, because of instability in European and Asian markets, is more and more international companies are taking a look at the United States,” he said. “We in the Lehigh Valley are in a very good position to capitalize on companies that want to be close to the Northeast market.”
King said he expects the economy to grow 2.5 percent to 3 percent in 2015. Stock prices and household wealth have reached record levels, he said, and U.S. household wealth has reached a record $81.3 trillion even though the housing market has not fully recovered yet.
King noted house sales are increasing and mortgage rates are below 4 percent, and that the average U.S. household will save $550 on gas in 2015. He also said unemployment is at 5.7 percent even though a larger amount of people who had left the workforce are now coming back.
“People who had been frustrated, who had looked and looked and couldn’t find anything, then decided not to look anymore, are now entering back into the workforce as unemployment has improved,” he said.
King said the Federal Reserve has not rushed to raise interest rates due to low inflation, and that wages have not risen along with stock prices and home values.
“What the Fed believes, and we certainly support, is you need to have some growth in wages to be that final element that we’ve been missing to get the economy rolling again as we want it to be,” he said.
Cunningham said 69 percent of the Lehigh Valley’s new jobs are coming from existing companies and start-ups. Noting that businesses often speak of the need for a skilled workforce, he said LVEDC is undertaking a region-wide study of hiring needs, working in conjunction with the Lehigh Valley Workforce Investment Board.
“We’re taking a hard look at output from our educational institutions (to) see precisely what we’re turning out in the region, and to take a hard look at what our businesses need to grow,” Cunningham said. “So stay tuned.”
Representatives from several major projects spoke during the symposium, including Mark Mulligan of VM Development Group about his Easton projects; Zachary Jaindl, principal of The Waterfront in downtown Allentown; and Clark Machemer of The Rockefeller Group, which is spearheading the FedEx Ground megahub project in Allen Township.
Ryan Conrad, CEO of the Greater Lehigh Valley Realtors, said that the overall real estate market is improving. Sales in 2014 were down 2 percent compared to 2013, but that was a lower drop than projected, and foreclosures and short sales are down 22 percent.
Additionally, homes are selling quicker, at an average of 70 days, and home prices have gone up 2.1 percent to an average of $197,000. Conrad said inventory is up 5.5 percent, and pending sales, an indication of future activity, are up 25 percent over the year.
“The real estate market is growing at a lively but steady pace,” he said. “Thought it can be frustrating to homebuyers and home-sellers, we think it’s the healthier way to grow.”
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