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An irreverent take on the macroeconomic environment. Dr Sam Chandan is President and Chief Economist of Chandan Economics and an adjunct professor in real estate and public policy at the Wharton School of the University of Pennsylvania.
There was plenty to cheer in last Friday's employment report. But even a cursory review of the data reveals improvements that are uneven along dimensions that matter for real estate.
Across multifamily, commercial real estate, and construction loans, banks' net lending in the second quarter increased by more than $100 billion from a year earlier.
Is the US economy on a roll? Sentiment in the commercial real estate market – as well as the direction of underwriting standards – suggests exactly that. The data does not.
The default rate across banks' multifamily and commercial real estate mortgages declined to 1.6 percent in the first quarter. In the case of the former, the default rate is now at its lowest point since before the financial crisis and recession.
The industry outlook for the economy has turned bullish. But perceptions of a recovery in jobs have only modest support in the data. It's not just a matter of time; the structural problems with our labor market won't solve themselves.
Barring an uncontrolled shock, the outlook for the US economy is modestly positive. After two years of underperforming versus potential, growth will quicken to just short of 3.0 percent during 2014 and 2015.
Banks increased net construction lending by $3.6 billion during Q3 2013. The legacy default rate on their construction loan balance sheets dropped to 4.9 percent. It's a welcome trend, though some institutions are taking risks as competition ramps up for stabilized property lending.