Forecast Still Positive for Economic, Housing Growth

Despite setbacks this year, the economic and housing outlook still looks positive over the next few years, according to one major forecast.

UCLA Anderson Forecast's third quarterly report of 2014, released Thursday, points to real GDP growth of about 3 percent over the next two years, following last year's full-year growth of 1.9 percent.

Growth in 2014 has been shaky so far, coming in at an annualized rate of -2.1 percent in the year's first quarter and an estimated 4.2 percent in the second.

On an annual basis, UCLA Anderson predicts GDP growth will bounce back a full percentage point to 3.1 percent in 2015 followed by 3.4 percent in 2016.

Though housing has struggled to keep up its momentum so far this year, the market is still expected to fuel economic growth.

"Despite the housing recovery being slower than we anticipated, we forecast that housing starts will rise from this year's estimated 1.025 million units to 1.32 million and 1.47 million units in 2015 and 2016, respectively," wrote UCLA senior economist David Shulman.

Of course, how much of that is expected to come from the relatively dormant single-family market isn't specified. The latest data from the Census Bureau shows new homebuilding in July grew to an adjusted annualized rate of 1.09 million, but most of that was attributable to a 33 percent spike in multifamily projects.

Also contributing to Shulman's forecast are pickups in nonresidential/commercial construction and investment in equipment and software.

Meanwhile, payroll job increases are expected to average 230,000 a month, matching the average growth seen over the last six months before August's sudden drop. By the end of 2016, the national unemployment rate is forecast to be at about 5.3 percent.

The UCLA Anderson Forecast also took a look at what's expected to develop in California over the coming years. While the national forecast looks fairly sunny, the Golden State is in for a continued slow recovery.

According to UCLA Anderson, employment growth in the state is forecast to be 2.4 percent in 2015 and 2.2 percent in 2016, which should push down the unemployment rate to 5.7 percent by the end of 2016

"The California economy is moving forward in an expansion from the depths of the Great Recession. But, even though the number of jobs is now higher than any time in the past, the state remains below its potential in output and employment," said senior economist Jerry Nickelsburg. "That we are entering the sixth year of expansion illustrates just how painfully plodding this recovery process has been."

As for the state's housing market, UCLA Anderson predicts what's true for the country will also be true for California.

"Construction permits have been increasing and our expectation is that this will continue through the forecast horizon," Nickelsburg said. "New home starts are expected to increase by 5 percent in California and nationwide."