Yun’s Economic Outlook: Who Could Ask for More?

May 17, 2019

REALTORS® Legislative Meetings & Trade Expo

Presenting a mostly optimistic view of the economy for 2019 and 2020, Lawrence Yun, chief economist at the National Association of REALTORS®, told audiences Thursday at the REALTORS® Legislative Meetings & Trade Expo in Washington, D.C., that a near-term recession is unlikely. But a few factors—particularly tariffs and the escalation of U.S. trade disputes with China into a “full-blown trade war”—could derail the country’s economic expansion, he said.

Yun presented his forecast at two forums: the Residential Economic Issues & Trends Forum and the Commercial Economic Issues & Trends Forum. Among his key points:

  • By July, America’s economic expansion will be the longest ever, marking 10 straight years of upticks since the recovery from the Great Recession began in June 2009.
  • China doesn’t play fair, but the imposition of tariffs on imports will have a negative effect on both the U.S. and Chinese economies.
  • With the Federal Reserve indicating it will not raise the federal funds rate in 2019, expect an increase in housing sales in the second half of the year.
  • While inventory shortages are easing, the country still needs more residential and commercial construction to keep up with the growth of U.S. households and increases in employment and wages.

Lawrence Yun

© National Association of REALTORS®

NAR Chief Economist Lawence Yun said at Thursday's forum that one economic red flag was the recent appearance of an inverted yield curve, which is when short-term debt has a higher yield than long-term debt. While such a scenario has historically led to recession, Yun told the audience that other factors, including low interest rates and low unemployment, are mitigating recession worries.

Most indicators in 2019 point to a positive outlook, Yun said. Consumer spending, business investment, and residential investment are all up, while government spending has remained neutral. The only negative indicator is in net exports. But U.S. imports have always been higher than exports, Yun said. “That’s because our economy is strong, and we have more money to buy things. We also have the extraordinary privilege of the U.S. dollar,” a safe investment for global investors compared with other currencies.

While affordability has been sliding and is now a big issue in some markets, Yun pointed out that NAR’s Affordability Index—a measure that takes into account home prices, income, and interest rates—is actually higher than in the year 2000. The reason: Interest rates were at 8% at that time, compared to 4% today.

Yun offered a tip at the residential forum: As a result of the 2017 tax reform, few Americans are itemizing their income taxes—so real estate professionals should be sure their marketing materials are updated. Instead of focusing on the tax benefits of owning, focus on the wealth effect of homeownership. Homeowners have a median net worth of more than $250,000, compared to near $0 for renters, he said. And while African Americans are still playing economic catch-up as a result of historical discrimination, those who own a home have a much higher net worth—a median of $100,000—than white renters.

Yun also pointed to the imbalance in wealth between older Americans and millennials, telling REALTORS® they were likely to see a pattern of wealth transfer in the next few years, as parents and grandparents choose to put their money into supporting the next generation’s home purchases.


At the commercial forum, Yun said lowered tax rates for businesses had resulted in more business investment and jobs. The national unemployment rate was 3.6% in April, according to the U.S. Bureau of Labor Statistics. “I never thought unemployment could go this low on a national basis,” Yun said. With 2.6 million new jobs in 2018, he added, the country is seeing a rare occurrence: more unfilled jobs than unemployed workers.

Yun presented NAR’s Quarterly Commercial Real Estate Survey, which collects data from commercial REALTORS® to provide an overview of market performance, sales and rental transactions, current economic challenges, and future expectations. For the first quarter of 2019, Yun said, respondents named the following market opportunities:

  • Opportunity zones, with the promise of reduced capital gains for investors who meet the statutory deadlines.
  • Affordable multifamily, senior, and student housing.
  • Small, affordable Class A/B garden offices and retail.
  • Speculative (prebuilt) industrial and warehouse space.
  • Vacant building purchases for redevelopment or repurposing.
  • Influx of foreign capital.
  • Robust local market and national economy.