A 7-PART SERIES ON WHAT EXPERTS PREDICT FOR REAL ESTATE IN 2021
Part 2- Policy Impacts on the Economy and Home Ownership
To understand what the real estate industry experts crystal ball for 2021 may predict, a strategy discussion was held with some of the most experienced and knowledgeable real estate experts. The cerebral panel covered topics such as capital markets, the economy, construction costs, development trends, effects of COVID, regulatory matters, and much more.
This article is the 2nd in a series of 7, broken into bite-size topics, related to the all-important question of given the current landscape and forecasted trends related to the economic, political, banking, healthcare, and real estate sectors, many real estate investors are asking the question should they be leaning into these headwinds, or should they be retreating to the sidelines.
Part 1 of the Series suggests that now is the time to be bullish on real estate investing. But what are the fundamentals driving that conclusion? Keep reading the entire series to uncover these fundamentals.
Here is what the experts had to say regarding Policy Impacts on the Economy and Home Ownership
Sam Herskovits, Executive Vice President at Madison Commercial Real Estate Services
As we turned the page into 2020, the US economy and its fiscal and monetary policy decisions were all pointing to a robust, strong and record setting economy. However, COVID-19 was a game changer. When comparing the economic meltdown of 2008 with that of 2020, there are some emotional and economic burden similarities, yet the fundamentals are completely different. The 2008 economic crash was more of a financial crisis, yet 2020 can best be construed as a service crisis. The entire society was locked down and masked up. The ability to go to a restaurant, school, bar, grocery store, fitness center, hair salon, place of worship, etc. all became a challenge. Consumer confidence was shaken, and everyone was uncertain as there was no end in sight.
The government from both sides of the isle worked together to create policies which would help to stimulate the economy, and more importantly, help all Americans through a very tough economic situation. Stimulus dollars were funded to help keep the economy moving, yet everyone knew that at some point, these funds would run out. However, we as Americans, are extremely resilient and when we get knocked down, we bounce right back up to fight another day.
The economy remains steady being buoyed by a federal reserve which continues to pump capital into the economy, constraining interest rates to record lows and ensuring that the US does not experience run-away inflation. And the empirical data is showing that even after the stimulus dollars have been exhausted out of our bank accounts, Americans are still spending money, still investing in the equity markets and real estate, and still going about their every day lives. It is truly a testament to how amazing our society is, and will continue to be, in the future.
From a policy perspective, the most important issues affecting our near-term and long-term economy will be centered around substantial fiscal, tax or economic policy shifts of a new Biden administration, as well as the ability of the US Congress to pass another stimulus package. The outcome of the January 5th Senate run-off election in Georgia will be very impactful with either a consolidated government under a Democrat Party rule, or a balanced Congress with a divided House and Senate. In short, the outcome of this run off will create the blueprint for economic policy decisions for many years to come.
From a macro level, the largest single investment for most US citizens, will be their home. Consequently, many administrations have supported tax incentives for first-time home buyers to get Americans in the practice of building up equity in their homes. The Biden platform is no different, as it also involves limited tax credits for first time homebuyers.
However, given the current fundamentals in the marketplace, what a Biden Administration does or does not do will probably not be the deciding factor. The fundamentals involved in single family acquisitions are at their all time best. Interest Rates are at record lows and are not expected to rise any time soon. Inflation is at a stable rate and that is not expected to run away in the near term. Demand continues to rise for single family homes, and this trend is not expected to level off.
As previously stated, this current situation is more of a service crisis, as opposed to a financial crisis. Consequently, it appears that once the vaccine for COVID-19 is delivered, that we should have a robust and rapid recovery, and the economy will follow. This belief has been evidenced by accelerating single family closings, and this level of transactions is expected to continue in 2021 regardless of tax incentive for first time homebuyers.
MarketSpace Capital, LLC is a Houston, Texas-based private equity real estate development firm focused on ground up developments and value-add investments throughout the United States.
Disclaimer: *For sold properties, actual sales price is reported. For active investments, the Estimated Current Value is based on the Managing Member’s estimate of current value. Recent acquisitions are generally valued at the acquisition price. Values may be internally prepared. This web-page/website is for informational purposes only and is qualified in its entirety by reference to the Confidential Private Placement Memorandum (as modified or supplemented from time to time, the “Memorandum”) of any offering of MarketSpace Capital.