Posts

31118274 - clock with words time for change on its face

Mark Zandi, the chief economist of Moody’s Analytics and founder of Economy.com told more than 1,000 attendees of NAIOP’s CRE Converge conference taking place in Miami Beach, that while the pandemic is altering the U.S. economy, changes in store bode well for commercial real estate.

On the positive side, the economy has recovered 17 million of the 22 million jobs that were lost due to the pandemic. The policy response on the part of the Federal Reserve, Congress and the White House, including maintaining low short- and long-term interest rates, the CARES Act and the American Rescue Plan, have collectively kept the economy from failing.

“I’m assuming that the pandemic is going to continue to wind down, and that with each new wave the disruptions to the economy will be less significant. Over the course of the next 18-24 months, the pandemic doesn’t go away but it largely fades away in terms of what it means in terms of our work and lives,” Zandi said.

Zandi noted that however it shakes out, the infrastructure spending packages will also be beneficial to the economy. And he said that with respect to monetary policy, the Fed will slowly take its foot off the monetary accelerator – raising short term interest rates by spring of 2023 and tapering the quantitative easing of buying bonds.

The pandemic has not only accelerated certain trends, it is causing permanent shifts. These include remote work, less domestic travel generally, less business travel and an increasing net migration from urban cores.

Prior to the pandemic, a net of 275,000 people on average were leaving urban cores in the U.S. to live in other locales; during the pandemic, that number jumped to more than 600,000.

Zandi also identified the risks inherent in the post-pandemic economy:

  • The Delta variant of COVID-19 has unnerved consumers and workers.
  • Fiscal policy is at risk with Congress threatening to not fund the government’s fiscal year, which begins Oct 1.
  • Housing prices are stretched and possibly primed for a correction as interest rates begin to increase.
  • Maybe not today, but at some point down the road, government debt and deficits will become a problem.
  • Supply chain shortages continue to make it difficult to obtain building supplies and consumer goods.

Meanwhile the pandemic has also fueled a significant rise in productivity.

“There are fundamental things going on in the economy that argue for stronger productivity growth. Businesses are investing in labor-saving software, baby boomers are retiring, and the workforce is becoming younger,” Zandi said. “That’s a big deal for the economy. It goes to profits, wages, and our ability to address our fiscal policies.”

 

Source: GlobeSt.

 

46089472 - cash dollars lying on the plane.

The Senate just passed a $1 trillion infrastructure package, then turned to a $3.5 trillion measure that could include more extensive investments in housing and changes to zoning policies.

The infrastructure bill includes $550 billion for bridges, roads, high-speed internet and other projects. The White House has billed the spending package as the largest-ever investment in public transit. Under the measure, Amtrak receives $66 billion, which is the most the rail service has received since its founding in 1971, according to the New York Times.

The Senate is now considering a $3.5 trillion plan that Democrats hope to approve through reconciliation, a process that would not require Republican support. The resolution allows for up to $332 billion for housing and other investments. That could help fund a $213 billion Biden plan to build or preserve more than 2 million affordable housing units. Other housing proposals in Biden’s infrastructure plan, including an expansion of Section 8 housing vouchers and incentives for cities and states to eliminate exclusionary zoning, could also make it into the larger plan.

The Associated General Contractors of America, whose members would benefit from the approved plan, urged the House to pass it as quickly as possible. House Speaker Nancy Pelosi has indicated that the chamber will not vote on the initial bill until the Senate passes the more extensive measure.

“Unfortunately, some members of the House want to delay action on the bipartisan measure until passing an unrelated, partisan, spending bill,” said Stephen Sandherr, the group’s CEO. “The last thing Washington should do is hold a much-needed, bipartisan infrastructure bill hostage to partisan politics.”

The New York Housing Conference is hopeful that the budget legislation will ultimately include changes to the Low Income Housing Tax Credit program. The group is advocating for a change to the program’s so-called “50 percent test,” which requires 50 percent or more of a development to be financed through private activity bonds in order to be eligible for such tax credits.

Because the federal government caps the number of such bonds New York can issue, the test limits affordable housing construction. Reducing the threshold to 25 percent would add 10,000 affordable housing units each year in the state, the group estimates.

“We have a housing crisis in this country. We certainly have a housing crisis in New York,” said Rachel Fee, executive director of the New York Housing Conference. “Getting around the state caps has to be a priority for New York.”

 

Source: The Real Deal

The Counselors of Real Estate, an international organization for commercial real estate professionals, ranked what its membership body recently voted on as the current and emerging issues it expects to have the most significant impact on real estate.

Topping the organization’s list in a detailed report just released was U.S. infrastructure, which it characterized as severely lacking, and lagging behind many other developed countries.

“Inadequate infrastructure creates a hard ceiling to economic development, and real estate values are tied to sustainable growth,” Julie Melander, the 2019 chair of The Counselors of Real Estate, said in a press release about the ranking.

The nation’s roads, bridges, tunnels, railways, airports, the power grid, water systems, and levees are all in need of improvement and have failed increasingly often, the organization said.

President Trump has pledged to address infrastructure woes, and the White House and Congressional leadership have discussed funding for infrastructure to the tune of as much as $2 trillion, but action commensurate with the scale of the problem has not materialized.

Housing in the U.S. was the second item on the list, and the organization put an emphasis on the impact of growing inequality and the rising tide of unaffordability in housing, particularly for the middle class.

“Housing affordability is threatening the stability of the middle class, which will hit other parts of the economy as well,” Melander said.

The recently-imposed limit on state and local income tax deductions, along with Baby Boomers having trouble selling their homes were additional housing-related challenges outlined by the organization. Challenges related to weather and climate were third on the list, while slow technological progress including outdated physical plant systems in many buildings, economic challenges and high levels of institutional and personal debt also made the list.

 

Source: Miami Agent Magazine