Economic positives outweigh negatives according to real estate economists who addressed a standing-room only audience last week at The Counselors of Real Estate’s Midyear conference in Austin, Texas.
The three-day event is noted for bringing together thought leaders from around the world, offering balanced perspectives on the most critical issues affecting real estate.
K.C. Conway, CRE, chief economist – USA, Colliers International; Mark Dotzour, Ph.D., chief economist, Real Estate Center of Texas A & M University; and Richard Voith, Ph.D., CRE, president, Econsult Solutions, Inc. dissected the economy with moderator Hugh Kelly, Ph.D., CRE, clinical professor of real estate, Schaak Institute of Real Estate, New York University.
The consensus: for most of the U.S., real estate continues to recover and opportunities exist in many sectors.
Categorizing the high number of available government and private sector economic reports into memorable categories reflecting the 1966 western movie “The Good, The Bad, and The Ugly,” the panel mostly agreed that the U.S. economy is on the upswing.
“The U.S. is not experiencing high inflation or high mortgage interest rates,” said Voith. “This is a time that it would make sense to begin infrastructure investment, including roads.”
Dotzour noted that the Federal Reserve interest rate at zero has created an environment where Americans can again buy, which especially bodes well for retail spending – and investment.
Conway said real estate opportunity follows population, and that baby boomers are still driving real estate trends as they move into more densely populated cities to be near airports, healthcare facilities and activity.
“Not only do the baby boomers want this, so do their children,” he said, “noting that millennials (children born between the early 1980s and about 2000) are choosing not to live in the ‘dream house in the suburbs’ but in smaller spaces in major urban areas.”
Panelists cited the trend toward urban living as causing concern for some suburbs where housing is not selling rapidly.
If young professionals are locating in cities, and their parents have moved on – either to cities or amenity-laden active-senior communities – the question must be asked: who will buy their vacated suburban housing?
Despite the encouraging economic picture portrayed by the panel, and job growth in the private sector, Conway explained that there is a large segment of the American population that does not share the wealth.
He said wages are not increasing, and this is reflected in earnings reports of retailers such as Target and dollar stores, where consumer purchasing of lower-margin basic household goods is increasingly outpacing purchases of higher-margin items such as toys.
While not taking a political position, the panelists noted that government officials have deferred action on a number of significant economic issues including that of the U.S. debt ceiling until March 2015. The “no compromise” culture in Washington is also viewed as problematic.
