Happy New Year! Will It Be?
In the real estate world, 2014 will be more of the same. And so you want something more exciting and different? Look it could be a lot worse…
Money parks in the best markets, edges back into more peripheral places, and continues to steer mostly clear of everywhere else… The tension between the inevitable rise in interest rates and lackluster recovery plays out in slowly rising rates which will tame prospects further in many markets, which don’t have major prospects anyway. Individual stock investors and wealthy individuals (mostly one and the same) join institutions looking for yields and keep priming stock prices. Helped by job sapping technologies, corporations maintain solid profits off of productivity gains—keeping wages low and hiring down… At some point this model breaks down when spending growth slackens from the overall mass of under-compensated people not being able to buy enough products and services to prop up profit margins—that’s when the stock market will sink, but not in 2014... It follows, the unemployment rate may lower further, but high paying jobs remain hard to find… The CEO and executive suite level husband gains, but the vast majority of American workers in the rank and file fails to cash in… Constrained government spending continues to pump less money than otherwise into the economy—not exactly an elixir for hiring increases at not-for-profits, defense contractors or any other business living off government largesse... The tepid Christmas retailing season affirms the general discomfort of the average consumer—many of whom live pay check to pay check with diminished if any savings or pension prospects… The Detroit bankruptcy paves the way for more states and municipalities moving over time to reduce pension and benefit outlays to public employees… The graying baby boomer cohort now comes to realize it will have less to spend in retirement than originally planned—they scrimp more out of necessity. Still there are enough affluent seniors to pay for senior housing alternatives, just developers shouldn’t get carried away… ObamaCare actually looks like it may temper overall healthcare spending, but more of the cost burden shifts from employers to individuals and taxpayers (again one and the same) in the form of higher premiums and higher deductibles or through greater government support... Higher payouts and tax bills mean folks have less to spend in shopping centers and have less appetite to own homes or rent more expensive apartments… Low interest rates have been a springboard to housing rebounds in some markets—any rate increases in the year ahead could dampen possible building splurges as already stretched folks stay out of the market… At least energy price hikes should moderate given new U.S. supplies, absent an always possible world crisis… Office developers concentrate activity in the leading urban markets, building sustainable and flexible facilities which pry tenants out of less sustainable and less flexible existing structures, many of which aren’t that old… Apartment developers must be concerned about not overdoing it… E-tailing relentlessly eats into shopping center prospects—the discounters battle the web-based giants in the shadow of fortress malls, but can shippers keep up with increased volumes? We need more logistical distribution warehouses near airports in the major population centers and key shipping hubs... So in the right place with the right product, we can make money… There’s no big upside, but the downside risk seems muted at least for the next year… It could be worse, but let’s consider that a year from now as longer term trends referenced earlier kick in. And to that point did you see the latest census stats—the U.S. population grew at the lowest rate in seven decades in 2013.
Are we no longer the land of opportunity?