News
The
Cal State Companies: Center for Real
Estate Studies ¨ Cal
State Properties ¨ Cal State Investment LTD Partnership
Real Estate Investment
Outlook
October
2019
LOS ANGELES ,
CA
Change in the monetary policy stance in 2019 has been
dramatic. The Feds have moved from a
wait-and-see attitude in early 2019 back to a let-up mode. The Fed cut rates by
50 basis points in 2019. Against the backdrop of threats and a slowing due to
trade tensions, this seems to make sense.
Our
economic expansion is established and is now officially the longest on record.
While business cycles do not last forever, we should recognize that the longer
an expansion lasts, the more likely it is to stagger. Another sign suggesting
that our economy is in the later stages of the business cycle is the extremely
low unemployment rate. The yield curve shows signs of inverting from time to
time, such inversions are not a guarantee that a recession is coming. They
tend, however, to coincide with an increased risk of an economic downturn six
months to two years into the future.
We feel
a recession is unlikely thanks to strong household income growth. Consumer
spending is likely to remain solid, but trade uncertainty will be an ongoing
drag on real estate investments. Tariffs themselves are harmful to grow. The
larger impact occurs because of the rising uncertainty, which brings caution.
Tariffs make investors unsure to what may be in the future.
Many investors are waiting for greater clarity. We have already seen a
significant decline in activity, and more weakness in sentiment indicators is
likely in the coming months.
Despite the
slowdown in investment, we feel that consumer
spending growth is likely to remain solid, supported by continued improvement
in the labor market. Job gains appear to be moderating, but this is being
partly offset by a faster pace of wage growth. Overall, labor income has slowed
modestly, but growth is still near its post-crisis trend. The unemployment rate
has declined to multi-decade lows.
ApartmentData.com
reports that currently, the residential real estate marketplace is slowing
down. This specifically means that single-family homes are becoming scarce.
This is likely to drive up prices in areas that are experiencing limited supply
and high demand. Core Logic recently published a survey indicating that home
prices are expected to increase by more than five percent by May 2020. Scarcity
of affordable homes leads directly to increased demand for rental and lease
properties
ABOUT THE AUTHOR: Eugene E. Vollucci, is considered to be one of the foremost
authorities on real estate taxation and investing and has authored books in these
fields published by John Wiley & Sons of New York. He is the Director of
the Center for RE Studies, an educational and research organization. To learn
more about the Center, please visit our web site at http://www.calstatecompanies.com
UTUBE: https://youtu.be/868wrjNPQFM
No comments:
Post a Comment