Mississippi Housing Market Stable; National Economy Should See Modest, Steady Growth

Homeowners throughout the Southeast can expect to pay more for homeowner’s insurance in the coming year as a result of hurricanes in 2005, as well as higher property taxes rise because of higher real estate values. These are the financial forecasts of Bob Allsbrook, chief economist of AmSouth Bank. The rising cost of living doesn’t end there. Allsbrook expects interest rates will rise slightly in 2006, which could translate to higher credit card bills and higher house payments for those with adjustable-rate mortgages.

But the overall economic outlook for 2006 isn’t gloomy, according to the Jackson, Miss., Clarion-Ledger newspaper. Overall, the economy should grow 3 to 3.5 percent in 2006, with the strongest growth evident in the first quarter and slowing to 2.5 percent in the fourth quarter. Three percent is average growth for any sliding 10-year period since World War II. Overall spending will decrease, while consumer income is expected to rise and unemployment will remain low, experts say.

Stacey Wall, President and CEO of Pinnacle Trust Wealth Management in Ridgeland, Miss., expects the economy to grow 3.25 percent nationally in the coming year. He sees bird flu, terrorism and hurricanes as potential problems. Ashby Foote, President of Vector Money Management in Jackson, projects 3.5 to 4 percent growth, which he says is a good, solid economic growth rate for a mature economy like the United States has.

“There are some overhangs such as the U.S. government’s trade deficit, but all in all, I think you can expect a continuation of what we’ve been having, solid economic growth and controlled inflation,” said Zach Wasson, CFO at Trustmark National Bank, agreeing with that projection.

Experts believe the Federal Reserve will increase the interest rate on overnight loans between banks after the early part of the year.

Allsbrook expects the Federal Reserve to raise the federal funds rate a quarter of a point on January 31 and another quarter of a point on March 28. That would place the rate, currently at 4.25 percent, at 4.75 percent. If you add 3 percentage points to that figure, you get the prime interest rate — what banks charge to their preferred customers. Fluctuations in the prime rate influence other interest rates, not the least of which are mortgage rates.

The common sense advice for 2006 is not expect too much from investments. An 8 to 9 percent return is reasonable, and with energy prices expected to continue their volatility, consumers should be disciplined in saving money so plenty of cash is available for a big event that might come along (such as, say, a devastating slew of storms). Also, address your debt now even if your financial situation is fairly stable.

Wall doesn’t foresee the Mississippi housing market dropping significantly in value because it hasn’t seen extremes like California or Florida real estate. However, he voiced concerns about buyers who have purchased homes with no down payment, interest-only mortgages or variable rate loans.

“People are doing some risky stuff betting that housing prices are going to continue to rise,” Wall said. “As long as the housing market continues to rise, they’ll be okay. But it doesn’t take much of a down turn to get into trouble.”

Jackson Realtor Charlotte Smith expects interest rates to rise next year, but that this turn of events should send some business her way, as it prompts some people to make a decision about buying. Madison County, Miss., is growing rapidly in the aftermath of Hurricane Katrina, which displaced a tremendous number of Gulf Coast residents and damaged the properties of countless others.

All in all, it looks like a stable economic forecast for the Southeast, with a slight downturn in housing. Still, it’s hardly the doomsday-style collapse that has been predicted by armchair pundits for months. Instead, buyers may see some openings as Mississippi and Florida home loan rates rise enough to cool rapidly rising home prices, but not enough to quell demand in the large scale. It will also be exciting to see how the economies of some of the region’s most hurricane-damanged areas rebound.