There’s building chatter of an impending recession—but for the foreseeable future, housing, and the commercial market, specifically, is in steady territory, according to two economists.
“The economy is strong and we are seeing solid job gains, with no triggers to cause an economic recession,” said Lawrence Yun, chief economist of the National Association of REALTORS® (NAR), at the 2018 REALTORS® Conference & Expo, held November 2-5. “The mix of rising interest rates has led to some uncertainty, but the continued economic growth has the commercial market on solid ground.”
Borrowing costs have been historically low for some time, giving legs to the market in the post-recession recovery—and, for commercial investors, favorable margins. Increasing interest rates will limit those prospects, according to Yun.
The commercial market outlook for 2019, however, is stable. Commercial prices are set to slow, following a 93 percent run-up in the last eight years—but with the current economic engine firing, activity is expected to remain strong.
In October, the economy generated 250,000 jobs—a healthy showing—and growth in earnings hit a milestone rate. (There’s a connection between employment gains and interest in office and retail space.) According to NAR, 50 percent of all commercial deals are within the multifamily sector—also on firm footing.
Consumer confidence, meanwhile, is at its strongest in 18 years.
“The economic recovery has been historic in the last 10 years,” said Dr. Sean Snaith, director of the University of Central Florida’s Institute for Economic Competitiveness, during the event. “We are currently experiencing a boost in government spending, which directly grows gross domestic product. Policies like tax reform have led to profits, in turn feeding investment spending.”
However, there are issues on the regulatory side, Snaith said.
“Regulatory relief is the special sauce needed for the commercial real estate market to thrive even further.”
Continuing coverage of the REALTORS® Conference & Expo to come.
For more information, please visit www.nar.realtor.
Suzanne De Vita is RISMedia’s online news editor. Email her your real estate news ideas at sdevita@rismedia.com. For the latest real estate news and trends, bookmark RISMedia.com.