Musings of a Wannabe Economist

President Harry Truman once famously quipped he wished he could find a “one-handed economist,” lamenting that economists always hedge their opinions with on the one hand… but on the other hand…

At Fixture Studio, we don’t claim to be economists (of either the one-handed or two-handed variety).  Nor do we play one on TV.  However, we do like to keep a close eye on what's happening with the economy, particularly as it relates to construction, design and real estate.

In recent months, I’ve attended a variety of economic conferences, webinars and seminars.  The following are some of the high-level insights I’ve gleaned from these sources:

• Costs of building materials and supply chains have normalized.  Lumber prices are back to near pre-pandemic levels.  OSB (oriented strand board), which is like plywood, is a notable exception, due to some major production facilities coming offline.  But on the whole, lumber prices are flat to down year-over-year.
• Permits, starts and completions have reached a normal pattern, compared to recent years when supply chain disruption caused big gaps between starts and completions.
• There’s been a lot of talk about the Federal Reserve waiting to cut the federal funds rate until inflation eases and would like to see it get below 3%.  In recent months, inflation has landed in the 3.3 - 3.5% range, indicating that inflation is more structural than transitory.  This has resulted in interest rates staying “higher for longer.” 
• Mortgage rates are closely correlated to the 10-year treasury yield rate.  While rates remain stubbornly high, there are hopeful signs of mortgage rates easing now as the yield rate has slipped slightly in recent weeks.  As of this writing, the average rate on a 30 year mortgage slipped to 6.94% and is expected to inch lower over the latter half of 2024.  This is off the 23-year high of 7.79% in October of 2023.  A year ago, the rate averaged 6.57% and two years ago averaged 5.25%. 
• Conventional wisdom predicts mortgage rates will stabilize somewhere in the high 5% to low 6% sometime by the end of 2025 - more in line with historical averages.
• When mortgage rates ease, however, it’s expected that demand for new construction will put upward pressure on building costs.
• One expert opined that we are on the verge of a “golden decade of remodeling.”  Remodeling now accounts for more than 40% of all construction spending and is expected to grow to more than 50%.  This correlates to a trend of “buying a home that needs work” as a way to get into a new home.  Also, we are facing a huge increase in homes entering “prime remodeling years” (homes 20-40 years old).
• The size of newly constructed homes is down nearly 10% from the recent past.  The average size of a home constructed today is 2,067 SF.  Consumers are demanding better, not bigger homes.  
• Another interesting design trend is a desire for homes that are “more custom to the lifestyle of the homeowner,” rather than ready-made homes.
• The higher end of the market is robust, particularly as people relocate from more expensive locations to more affordable locations.  Colorado is #8 among states experiencing increases in net population growth.  The Western Slope is experiencing a migration not just from the Front Range but from all over.  Boomers are leading the way.  While real estate prices are more affordable in Grand Junction than Denver, the gap is narrowing.
• Retiree income is the highest in Mesa County than all of Colorado.  This provides a stabilizing effect on the local economy.  As does the composition of the overall economy with the largest share of jobs in healthcare (the fastest growing segment) followed by government (which includes Colorado Mesa University).  

This is a fraction of the data I’ve consumed in the last few months.  As an English Literature major, it can cause my head to swim.  However, as a wannabe economist, my synthesis of it all is as follows:  On the one hand, it may be tempting to wait until interest rates fall before beginning a new construction or renovation project.  But on the other hand, 2024 may, in fact, be the optimal time to begin building or renovating a home by locking in the current lower building costs.  Then, when converting to permanent financing at the end of the project, take advantage of mortgage rates which are predicted to fall in the coming year. 

While the economy is never certain, one thing is:  the Western Slope is an incredibly attractive place to live.  We have amazing access to the outdoors, an increasingly diverse and stable economy, a fantastic climate, a more affordable standard of living and incredible people.  It’s exactly what attracted Jami and me to relocate to Grand Junction and we’re proud to be a part of this community.  We like to say that Grand Junction is experiencing a “renaissance” – it’s coming into the next great version of itself – and we want to do our part to help shape this exciting evolution with design that truly makes a difference in how you live as well as exceptional client experiences.  

If you are thinking about either renovating your existing home or building new, pay us a visit. We have some particularly exciting opportunities in the Canyon Rim 360 development.