Appraisal Institute discloses economic forecast.

"Consumer confidence will be the key to overall economic improvement this coming year and the next," according to Dennis J. Jacobe, Ph.D., managing director of the Financial Research Institute in Washington. Jacobe was one of three real estate experts participating in the "Annual Economic Forecasting Panel" at the Appraisal Institute's 1993 Symposium held in Chicago.

Panelists agreed that consumer confidence, and integral part of the economy, undeniably influences interest rates, inflation rates, and ultimately the real estate market. Halbert C. Smith, MAI, SRA, professor and chair of the Dept. of Finance, University of Florida, predicted that next year's interest and inflation rates would remain at current low levels, and the unemployment rate would decrease. However, he cautioned that, "While national economic averages are impressive, they tend to disguise the vast differences in regional and local economic conditions across the country, particularly the West Coast and the Northeast."

The financial Research Institute reported findings from the FDIC's Survey of Real Estate Trends which concluded, "continued weakness [in the commercial and residential real estate markets] in the Northeast but clear signs that conditions in this region have bottomed out with over half of the examiners and liquidators surveyed reporting better housing markets and almost one fourth seeing improvements in commercial real estate. In contrast, conditions in California were not only weak but appeared to be getting worse. Virtually no improvement was detected."

Jacobe observed that confidence levels varied with regional real estate conditions. "While the regional picture indicates increasing consumer confidence in the Midwest and Southwest, optimism in the West has continued to drop," he stated. Commenting on the current financial sector, Jacobe noted that, "For a long time financial institutions were rebuilding their balance sheets and were not expanding lending, We have now reached a point where most institutions feel they can expand lending again. I think that's a significant change in terms of attitude."

James E. Gibbons, SRA, MAI, president of Sackman-Gibbons Associates in East Meadow, N.Y., asserted that the resurgence of the Real Estate Investment Trust (REIT - a corporation or trust that combines the capital of many investors to acquire or provide financing for all forms of real estate) indicates a healthier outlook for both commercial and residential real estate sectors. "I see REITs as a positive impact, a way to break the logjam, or 'credit crunch," getting movement into the market. Billions of dollars have gone into that field within the last six to nine months - that's money to make real estate more liquid." However, he cautioned, "anything that has blown up that fast has the potential for problems [in the future]."

The forecasting panel is part of the Appraisal Institute's Annual Symposium. Approximately 125 Appraisal Institute members and other real estate professionals attended this year's program which examined "Real Estate Cycles: Trends and Analysis."