Integrated Real Estate Services Forecast 2001 Page 7
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The historical unemployment rate for Long Island is:
1991
5.6%
1992
7.7%
1993
6.7%
1994
6.2%
1995
5.1%
1996
4.6%
1997
3.8%
1998
3.5%
1999
3.4%
2000
2.8%
Long Island and New York City should outperform the Northeast due to it diverse and
international economies.
Mortgage Interest Rates
The Fed raised interest rates 6 times since mid 1999 which continued throughout the year.
The Fed funds rate reached 6.5% in May 2000. They peaked at highs reached in 1995. As
such, mortgage financing activity fell sharply. Many real estate professionals reported a huge
drop off in business, some as much as 50+%. According to Doug Sease, Wall Street Journal
12/31/99, " The CMBS ( commercial mortgage backed securities ) market has been falling
since 1999 primarily due to rising interest rates and sagging share prices of public real estate
companies. Volume of business dropped about 50% from 1998-1999." Other areas of the
economy have been affected such as the steel industry. In August , mortgage interest rates
fell to 7.96% down from a 5 year high of 8.64% in May.
As of December 1, 30 year mortgage rates remained below 8% for the 16
th
straight week in
a row according to Freddie Mac. Yields on the 10 year Treasury fell below 5.5%.
With the continued economic weakness in the U.S. and abroad continuing to manifest itself
the Fed on December 19
th
held the line on interest rates but shifted its focus from guarding
against accelerating inflation toward protecting against excessive economic weakness. This
is interpreted to mean that the Fed will begin to lower interest rates early next year. The Fed
seemed surprised by the sudden slowdown.
Mortgage rates are expected to be choppy throughout the year 2001 with the probability of
continued downward bias which started a few months ago as the world economy weakens ,
then levels off then rises by the last quarter.
Asian Economy
During the summer of 1998 various countries of the Asian Economy went into a tailspin
