rss icon

Sunday, 20 December 2015 22:46

Q&A: Anirban Basu, CEO, Sage Policy Group Inc. | Chief Economist, Associated Builders & Contractors

Written by 
Rate this item
(0 votes)
Anirban Basu Anirban Basu

As chief economist of the Associated Builders and Contractors (ABC), Anirban Basu expects 2016 to be another year of modest growth in the range of 2.6 percent, well below the country’s pre-recession average of more than 3 percent. Speaking to the West Michigan chapter of ABC, Basu said the current state of the global economy and the strong dollar compared to other currencies won’t get the country back to previous growth rates in near term. Following his presentation, Basu spoke with MiBiz about some trends affecting the construction industry.

Multifamily construction has presented a lot of growth opportunities for general contractors in West Michigan and beyond. Do you imagine that will continue?

I think it’s a demographics story. There was a time when the housing market was booming. It was a time where a lot of baby boomers were reaching their peak-earning years and investing in even larger homes. Generation X was also chasing really large homes, often in the suburbs. For much of that period of the housing boom, oil prices were low. Gas prices were low. People didn’t seem to mind lengthy commutes as much. So the housing market was very strong, obviously things were overbuilt, prices rose too quickly in too many markets and they collapsed. That has caused Generation Y to rethink home buying. They don’t simply assume that it’s a good idea.

Will people in that generation ever change their minds?

My very strong belief is that as more form families and have younger children, then home buying will become all the rage again. It may take more than a few years. But it’s something that will play out over the next decade and beyond.

If that trend plays out, what does that mean for all the apartments being built right now?

I think that we’ll wind up with too many apartments in urban America. As Generation Y living in those apartments moves out in surprisingly large numbers to the suburbs, at that point, I think you may see another round of condominium conversions. We saw this roughly a decade ago. Developers will tell you these are really hard deals to get done, but they can get done because they did them a decade ago in large numbers.

Who will want to move into those condos?

What you’ll see is baby boomers looking to downsize and looking for more urban opportunities and many actually prefer ownership because that’s what they’ve been accustomed to, whereas their children who have been living in the cities move out to the suburbs to homes.

Where else will we see significant development?

I also think there will be a significant amount of growth in the market for suburban apartments. There’s a lot of baby boomers who will need the equity in their homes to live on in their retirement years, so they will be apartment dwellers but they’re not necessarily interested in moving into the cities. I think that’s an under-supplied market and I think you’ll see quite a bit of development in the next decade.

What should developers and contractors be watching for in the next year?

The leading threat to the country’s well-being, I think, is the national debt, which is now around $18 trillion. I don’t think it’s a crisis in 2016. People are still willing to buy U.S. treasuries and willing to finance the country’s debt, often at extraordinarily low interest rates. But there will come a time over the next 10 to 15 years that there will be a crisis.

What are some things that could happen next year that would surprise people in the economy?

There’s so many possible surprises — a geopolitical event comes to mind. The world seems to be a pretty unsteady place. I think people would be really surprised if we got a significant rebound in commodity prices. I think the conventional wisdom is that gasoline will stay very affordable and natural gas will stay affordable. Copper prices will stay low, and gold prices are below $1,100 an ounce.

But one of the things about that is when prices are high, people expect them to stay high and when prices are low, they expect them to stay low. They tend to not stay where they have been. I think that’s one of the risks in the economy that not a lot of people are talking about.

Interview conducted and condensed by Nick Manes.

Read 1085 times Last modified on Monday, 28 December 2015 10:31

Breaking News

September 2018
26 27 28 29 30 31 1
2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28 29
30 1 2 3 4 5 6

Follow MiBiz