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New Methodology Reflects Demographic Changes in the U.S.
Posthurricane Population Changes Revealed in 2006/2011 Demographic Data
As economic experts ponder growth in 2006, the housing market remains central in the debate over current trends. After the last brief recession in 2001, housing construction was one of the few growth sectors in the economy. An unprecedented leap in home value combined with low interest rates, innovative financing, and government incentives heated the housing market, resulting in historic rates of activity. Economic trends were impacted by demographic trends that included the maturing of Generation Y (according to BusinessWeek Online, anyone born between 1979 and 1994) into their household formation stage and investments by the baby boom generation in second-home purchases and retirement planning via real estate.
New construction has added a net gain of 10 million housing units, from 115.9 to 126 million units projected as of July 2006. The median home value in the United States in 2000 was $112,000; today, it's $181,000, an annual increase of eight percent. The most expensive median home value is found in Hawaii with a figure of $514,000, followed closely by California with a median home value of $497,000. Growth rates in the United States ranged from 3.9 percent to 16.5 percent.
What is the future of the housing market? In January 2006, new home sales declined for the first time in five years as the housing market began to cool. Mortgage interest rates are climbing, inventories are increasing, refinancing opportunities are dwindling, and the potential for loan defaults in the subprime lending market is rising. However, a bright spot in the slowing of home value appreciation is the affordability of homes for more people, particularly first-time buyers.
The quest for affordable housing continues to attract population growth in the suburban counties of thriving metropolitan areas. The fastest-growing counties through 2006 represent suburban sprawl in Flagler County, Florida; Loudoun County, Virginia; Rockwall County, Texas; and Douglas County, Colorado. Sustained population growth increases the appreciation of houses in the most popular counties; for example, home values in Flagler County increased by 2.2 percent annually from 1990 through 2000, and the population growth averaged more than five percent annually. Today, the median home value in the area tops $200,000 and is growing at a rate of more than 12 percent annually.
How will the cooling housing market impact the economy? The economy is healthy and appears to be on track for continued growth. The Real Gross Domestic Product, the inflation-adjusted value of all final goods and services produced in the economy, continued to grow at a rate of 3.2 percent. Real output is expected to grow faster in 2006. Brisk growth in the civilian labor force results from another two million hires through July and a decreasing rate of unemployment, down to 6.6 percent. Nearly half of all employment gains came from expansion in the construction and retail trade industry sectors at more than 454,000 and 584,000 jobs, respectively. Employment continues to grow, keeping unemployment rates at near historic lows. Productivity, or the output per hour, grew at a rate of 2.7 percent, a bit slower than the pace of 3.5 percent that was calculated in 2004. However, policymakers are watching for warning signs, such as inflation, rising energy costs, growing public and private debt, and a deceleration in residential real estate sales that could derail the current economic expansion.
The unknown factor in the economic outlook is actually a demographic trend: the retirement plans of the baby boom generation. The first cohort of the baby boom generation turns 60 in 2006. Will these individuals begin to withdraw their retirement savings or change their investments? As this group approaches retirement, many will alter their portfolios by shifting away from more volatile stocks into bonds that could keep rates low in the long term. The baby boom generation will impact the economic outlook, possibly by acting as a counterbalance to assert downward pressure on interest rates.
These demographic, housing, and economic trends are only part of the information revealed by Esri's 2006/2011 demographic data updates. The posthurricane population findings portion of the 2006//2011 updates will continue to change as people opt to return to the affected areas and rebuild their lives or prefer to stay in their new locations. These numbers will continue to change until these life-altering decisions have been made by all who were affected by the 2005 hurricane season.
Posthurricane Population Findings Remain Fluid
Forecasts of dramatic changes are not popular; forecasts of catastrophic change even less so, although the change may be projected from known conditions. Projections must be derived from current events and past trends. The past and the present are known, so the future must be extrapolated from this knowledge base. Therefore, none of the July 2005 demographic data forecasts could include the catastrophic effects of Hurricanes Katrina, Rita, and Wilma on Florida and the Gulf Coast communities in Alabama, Louisiana, Mississippi, and Texas. The force of these storms was unprecedented, as were the results.
Gauging the effects of these storms is exacerbated by a number of things, such as the lack of information from the usual data sources. Estimates for 2005 commonly reflect a midyear date of July 1óbefore the storms. Databases that are updated continually have not been revised to incorporate the loss of population and businesses in the impacted areas because the situation is still too fluid. Aerial imagery can be misleading. Houses that were completely destroyed along the Gulf Coast may show only a foundation or steps that lead nowhere. Houses that were flooded by the levee breaches in New Orleans are still standing, apparently untouched. Only the water lines reveal the underlying damage to the houses.
To estimate the effects of Hurricanes Katrina, Rita, and Wilma, Esri has investigated new sources of information culled from agencies that respond to disasters, news reports, and fieldwork. Some of the information is conflicting; all of it is subject to change. The following is what Esri's data development team learned as of February 2006:
These numbers will change as new facts become available. As recovery and rebuilding continue, no one yet knows the full impact that these storms inflicted on the southern United States.
For more information about Esri's demographic data, call 1-800-292-2224 or visit www.esri.com/data.